The price of crude oil tumbled yesterday, after scaling new heights earlier in the day, as traders fled the market in search of investments safe from the US economy’s worsening plight.

Oil fell by $7 a barrel after soaring to a new record of $111.80 on the Nymex exchange in New York. Oil products, such as heating oil and petrol, also lost ground, following the crude price – which lost 6 per cent of its value in only a few hours of trading - lower.

The mounting confusion over the future of commodities in a world of diminishing credit and weakening demand was heightened by a report from the International Energy Agency (IEA) that failed to explain the high oil price.

A closed meeting on the oil price, held yesterday at the IEA in Paris and attended by leading oil companies, regulators, banks and traders, could draw no firm conclusion from the large increases in investment flows into oil.

However, the organisation noted the issue of rising costs of production and exploration.

“With hindsight, historical price rises were seen as closer to marginal costs than was previously perceived at the time,” the IEA said.

In a separate report, the Centre for Global Energy Studies (CGES) gave warning that Opec was following a high-price policy and showed no signs that it was willing to supply more oil to meet demand.

However, in its Monthly Oil Report, the CGES noted the “bravado” of investors in Nymex’s US Light Crude Futures in the face of mounting evidence that American demand for oil products was weakening.

According to the CGES, US petrol consumption has been falling since last August and recently registered a 150,000 barrel-per-day decline.

“This is hardly surprising, given that gasoline pump prices thus far in March are 25 per cent higher than a year earlier. The US consumer - already burdened with debt and troubled by house price falls and gloomy job prospects – is facing sky-high gasoline prices at a time when petrol stocks are at five-year highs,” the CGES said.

Other commodities have also been pummelled by the mounting fear that recession would reduce consumption of raw materials. Zinc, aluminium and copper fell on the London Metal Exchange, with the red metal losing 4 per cent of its value.

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