Oil sank below 100 dollars for the first time in five months in London Tuesday after OPEC signaled it would keep its current production ceiling, despite declining prices and slowing global economic growth.
Brent North Sea crude for delivery in October dropped as low as 99.04 dollars before closing at 100.34 dollars a barrel in London, a decline of 3.10 dollars. It was the first time since April 2 that Brent had fallen below the psychological 100-dollar barrier.
New York's main contract, light sweet crude for October, plunged 3.08 dollars to settle at 103.26 dollars a barrel.
Since peaking at record high levels above 147 dollars in July, oil has trended downward toward the psychological barrier of 100 dollars, first crossed in early January.
The sustained decline in oil prices has come amid concerns about softening demand as the world economy falters amid financial market turmoil stemming from the worst US housing slump in decades and a related credit crunch.
The market was focused on OPEC's first official meeting since March. The meeting opened in Vienna in the evening because of fasting for the Muslim holy month of Ramadan.
Brent's sharp decline Tuesday came after the president of the Organization of the Petroleum Exporting Countries predicted the cartel, which supplies 40 percent of world oil, would keep its production ceiling unchanged.
"We are going to stay with the level of production where we are now," OPEC president and Algerian Energy Minister Chakib Khelil told reporters ahead of the meeting.
The 13-nation OPEC has not changed its official production ceilings of 29.67 million barrels per day (bpd) since its September 2007 meeting a year ago.
Some analysts had suggested OPEC would cut its excess output, estimated at about one million bpd.
They also believe that Saudi Arabia -- the world's biggest producer of crude oil -- would be happy to see prices fall below 100 dollars to help stimulate global economic growth which has slowed sharply in recent months.
Mike Fitzpatrick, analyst at MF Global, said the economic slowdown in the eurozone would push the euro further lower to the benefit of the dollar, "exacerbating the fall in oil prices."
A stronger greenback makes dollar-priced oil more expensive for buyers using weaker currencies.
"In the final analysis though, it is particpants' calculation that demand is shrinking and will continue to do so that has been driving the market lower, particularly since prices crossed the 118-120 dollar threshold," Fitzpatrick said.
The crude oil price decline came despite weather forecasts that Hurricane Ike will enter the Gulf of Mexico, where a quarter of US oil is produced, on Tuesday.
"Restrengthening is expected once Ike moves into the Gulf of Mexico," the National Hurricane Center warned.
Phil Flynn at Alaron Trading said that oil was readjusting its value as a financial instrument in the larger macroeconomic universe.
"In the first part of this year oil was used as a hedge against the financial crisis and now that hedge is coming off. And despite IKE and OPEC, for the moment, that trumps all," said