World oil prices have fallen below the $90 a barrel level in Asian trading amid fears that demand for energy will be blunted by a US economic slowdown.

The prospect of a full-blown recession has pulled crude oil back from a record level above $100 a barrel that it hit on January 3 to below $90.

In volatile trading, the price for light sweet crude for delivery in February was 32 cents lower at $89.81. Traders even speculated that the price could fall as low as $69.

Tony Nunan, of Mitsubishi Corp’s international petroleum business in Tokyo, said: "Everyone stops spending, and that will drive prices further down. I can see prices dropping to the lower 80s or even the higher 70s as we move towards the end of the first quarter."

Asian shares slid heavily on the back of heavy Wall Street losses prompted by further fears of a US recession. However, Asian markets staged a comeback late in the day on hopes that that President Bush would propose measures to boost the flagging US economy.

The recovery in sentiment lifted the dollar to 107 yen and away from a 2½ year low that it had struggled to escape from in early trade, while yields on Japanese government bonds ticked up again after hitting two-year lows.

While Japanese shares recovered, Hong Kong's Hang Seng Index was still trading behind, though it erased some of its 3.7 per cent early slump to be just 1.2 per cent down by the afternoon.

European shares were expected to continue their woeful start to 2008 with all the major European markets expected to open lower.

Asian shares initially plunged heavily on a battery of fresh US economic news that underlined fears that the world's biggest economy was heading for a recession.

However, President Bush has proposed a $150 billion plan of tax rebates for families and breaks for businesses to bolster the economy. More detail is expected about the proposals today.

Asian investors sought value in industrial stocks, buying shares such as Nippon Steel Corp, which closed up 5.24 per cent. Japan’s Nikkei average closed up 0.56 per cent after earlier hitting its lowest level since late 2005.

The change of heart came too late for Australia’s benchmark S&P/ASX 200 index, which finished down for its tenth straight session to log its longest losing streak in 26 years, despite clawing back most of an early plunge.

Wall Street's heavy losses saw the benchmark S&P 500 drop 3 per cent to a 15-month low on Thursday after a slump in regional factory activity and hefty losses reported by Merrill Lynch.

However, Ben Bernanke, the US Federal Reserve Chairman, signalled that he was ready to make further interest rate cuts this month to try to keep the US economy out of recession.

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