Oil prices closed below $100 a barrel for the first time in six months, tumbling in another dramatic sell-off as the demise of Lehman Brothers and the sale of Merrill Lynch exacerbates worries about the US economy.

Brent North Sea oil fell by $5.20 to settle at $92.38 a barrel on the ICE Futures exchange, while US crude shed more than $5 a barrel and has now given up virtually all its gains for the year, extending a steep, two-month slide from record levels above $147 a barrel.

Light, sweet crude for October delivery fell $5.47 to settle at $95.71 a barrel on the New York Mercantile Exchange - oil’s first settlement under $100 since March 4.

Prices fell below $100 last week despite a pledge by Opec, the 13-nation cartel responsible for 40 per cent of the world’s oil production, to cut supplies following a key meeting in Vienna.

There had been expectations that oil prices would bounce on Opec’s move as well as concerns that Hurricane Ike would cause severe damage to supplies as it headed over the production-rich Gulf of Mexico and across Texas.

However, damage to US oil platforms caused by Hurricane Ike had not been as bad as feared and Michael Davies, an analyst at Sucden, said: “Turmoil in the financial markets hurt sentiment and reinforced concerns about weaker oil demand growth.”

The US Department of Energy lowered its forecasts for 2009 global crude oil demand and the International Energy Agency cut its estimate for demand growth this year by 100,000 barrels per day (bpd) and for 2009 by 140,000 bpd.

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