London: Oil plunged $4 to below $97 a barrel on Monday as investors fled to safer havens due to turmoil in the US financial system and on early signs Hurricane Ike spared key US energy infrastructure.
Lehman Brothers filing for bankruptcy protection and Bank of America’s agreement to buy Merrill Lynch stirred concerns mounting global economic problems would slow energy demand further, sending investors out of oil and into safer havens.
US crude dropped $4.28 to $96.90 barrel by 1024 GMT after touching a nearly seventh-month low of $96.31 a barrel. U.S. oil dropped below $100 briefly on Friday for the first time since early April, with trade open for a special session on Sunday due to Hurricane Ike.
London Brent crude fell $3.83 to $93.75 a barrel.
Energy firms rushed to offshore facilities and coastal refineries to check for damage on Sunday after Hurricane Ike’s direct hit on the Houston energy hub left a quarter of US oil and refined fuel production idled and millions without power.
Early reports from emergency officials and oil companies indicated little or no severe damage to energy infrastructure -- signalling a possible quick recovery to production though near-term supply problems were expected.
High fuel prices and wider economic problems have dragged down oil demand in the United States and other large consumer nations, sending crude prices from a record high over $147 a barrel in July.
Surging demand from emerging economies like China launched oil on a six-year rally, with additional support coming this year as investors rushed into oil as a hedge against inflation and the weak dollar.
The US dollar sank even as crude tumbled on Monday, with a broad flight from risk igniting U.S. Treasury debt, gold and the low yielding Japanese yen.