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London: Oil fell below $88 a barrel yesterday as stock markets declined further, shrugging off a temporary reprieve from Tuesday's steep cut in US interest rates amid persistent fears of a global econ-omic slowdown.
Stock markets across Europe fell, wiping out some of the previous sessions gains, while Wall Street looked set to fall amid fears worse was still to come.
US crude fell nearly 2 per cent, $1.69, to $87.52 a barrel by 1340 GMT, after hitting a low of $86.11 in the previous session amid a global stock market rout.
London Brent crude fell $1.38 to $87.07 a barrel.
Some analysts said funds and speculators have been exiting open positions in oil and other commodities to cover margin calls and finance losses in equity markets.
"I think a lot of people realise the underlying weakness of the economy is still unfolding... traders feel that there are lots more losses still waiting to be revealed," said Robert Nunan, manager at Mitsubishi Corp's risk management unit.
Oil had plunged on Monday and Tuesday, as world stock markets posted their steepest losses since September 11, 2001 amid widespread concerns that the impact from the US credit and housing crisis could trigger a recession, curbing the steady rise in oil demand that has fuelled prices for five years.
Analysts said commodity markets were still holding up relatively well as the underlying economic momentum, especially in Asia, was still supportive.
"Oil's ability to go down another $10 to $15 from here really depends upon a deteriorating outlook for the economy. We are not going to go down $15 unless the economic outlook starts to look pretty bad," said Francisco Blanch, head of commodity research at Merrill Lynch.
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