Oil prices slump on demand fears

World oil prices hit multi-month lows on Tuesday as traders eyed the prospect of slowing energy demand in China and the United States, and as the OPEC cartel slashed its forecasts for oil consumption. The energy market also suffered heavy falls, in line with tumbling global equities, as investors fretted over a possible new worldwide economic downturn and eagerly awaited an interest rate decision from the US Federal Reserve. New York's main contract, West Texas Intermediate light, sweet crude for delivery in September, plunged in Asian deals to $75.71 a barrel -- the lowest level since September 29, 2010. It later stood at $79.05, down $2.26 from Monday. Brent North Sea crude for September dived as low as $98.74 a barrel, hitting a level last seen on February 8, before pulling back to $101.65, down $2.09. "Overnight, oil prices have taken another extraordinary plunge," said PVM Oil Associates analyst David Hufton. The energy market has been badly hit in recent days by the eurozone debt crisis, Washington's loss of its AAA credit rating and faltering global growth. China meanwhile revealed Tuesday that the nation's inflation rate hit 6.5 percent in July, the highest level for more than three years. The news has sparked intense concern about monetary tightening and fresh instability in the Chinese economy at a time of renewed global financial turmoil. "Oil prices are still on a nosedive... pushed by price slumps on equity markets and higher risk aversion," said Commerzbank analyst Carsten Fritsch. "WTI has slipped by as much as seven percent to well below $80 a barrel, its lowest level for almost a year. Brent has also suffered losses and dropped below the $100 a barrel mark temporarily for the first time since February." Crude futures had already plunged dramatically on Monday as the unprecedented downgrade of the United States's credit rating shook financial markets and sparked fears of slowing global energy demand. Standard & Poor's announced last Friday that it was cutting Washington's long-term sovereign debt rating from AAA to AA+. Financial markets are also tumbling as traders head for the exits amid heightened fears of a sharp economic downturn, prompted by the faltering US economy and the burgeoning eurozone debt crisis. Against this gloomy backdrop, the OPEC oil cartel -- whose 12 member nations pump about 40 percent of global oil supplies -- downgraded its global crude demand forecasts on Tuesday. The Organization of Petroleum Exporting Countries lowered its official predictions for 2011 and 2012 crude oil demand, citing concerns for the economic health of developed countries. The cartel forecast in its monthly report that demand for crude was expected to reach 88.14 million barrels per day (mbd) in 2011, down from a previous estimate of 88.18. For 2012, it put the figure at 89.44 mbd, down from 89.50 mbd.