SINGAPORE – Oil prices plummeted Tuesday in Asia, falling below $92 a barrel as investors feared the U.S. credit crisis that brought down brokerage giant Lehman Brothers will drag on global economic growth and restrain demand for crude.
Light, sweet crude for October delivery tumbled $3.77 to $91.94 a barrel in electronic trading on the New York Mercantile Exchange midday in Singapore. The contract fell $5.47 overnight to settle at $95.71, the first time oil closed below $100 since March 4.
In a stunning turn of events Monday on Wall Street, Lehman Brothers Holdings Inc., a 158-year-old investment bank, filed for bankruptcy after failing to find a buyer and Merrill Lynch & Co. agreed to be bought out by Bank of America Corp.
"People are selling everything. It's a bit of panic," said Jonathan Kornafel, Asia director for market maker Hudson Capital Energy in Singapore. "We may not have seen the end of demand destruction. It's scary what going on economic-wise right now, and that's why oil is selling off."
The Dow Jones industrials lost 504 points, or 4.4 percent, on Monday in their worst point drop since the September 2001 terrorist attacks, and Asian stock markets tumbled Tuesday. U.S. Treasury Secretary Henry Paulson tried to calm markets, saying the American people can remain confident in the "soundness and resilience in the American financial system."
Crude fell despite an attack by militants on an oil-pumping station operated by the local unit of Royal Dutch Shell PLC in southern Nigeria with dynamite and other explosives Monday which killed at least one guard in the third day of heavy battles between the armed forces and militants fighters.
Shell said one guard died and four others suffered injuries in the battle, which prompted an evacuation of some facilities in the southern region. No details were given about any effect on oil production.
The Movement for the Emancipation of the Niger Delta, the region's main militant group, claimed responsibility for the attack. Since it emerged nearly three years ago, the group has mostly focused on hobbling Nigeria's oil industry, bombing pipelines in hopes of forcing the federal government to send more revenues to the impoverished oil-producing south.
"When you start to see the market not paying attention to what's going on around it, the fundamentals are not being closely looked at," Kornafel said. "This drop since mid-July seems a bit overdone."
Crude has fallen about $55 — or 37 percent — from its all-time trading record of $147.27 reached July 11.
In other Nymex trading, heating oil futures fell 8.08 cents to $2.7104 a gallon, while gasoline prices dropped 7.0 cents to $2.4914 a gallon. Natural gas for October delivery fell 8.4 cents to $7.29 per 1,000 cubic feet.
In London, October Brent crude fell $2.33 to $90.27 a barrel on the ICE Futures exchange.