Oil prices sink to year low

Oil prices are at their lowest level since April 2000

Oil prices, which surged after the attacks on the US, have collapsed as hopes rose that counter-terrorist action would not disrupt supplies.

In the biggest one day fall since the end of the Gulf crisis ten years ago, futures in the benchmark Brent oil crumbled 13%.

Brent crude futures for November fell by $3.7 a barrel to $21.70, a rate not hit since April last year.

And in New York, crude futures dived $3.5 to their lowest levels for almost two years.

The price of Brent crude was, at Monday's low, almost one quarter below peaks which followed the attacks two weeks ago on the World Trade Center and Pentagon, as investors rushed for assets considered safe havens in times of turmoil.

A drop in the price of crude oil should feed through to other oil products such as petrol, diesel and feedstocks to make plastics.

Key developments

Traders said Monday's price collapse reflected a cocktail of news viewed as negative for oil prices.

Hopes grew that the imminent US military assault on terrorists would involve surgical strikes, rather than a broader onslaught which might stir up tensions in the Middle East.

The worsening slowdown in global economic growth would limit industrial activity, and temper demand for oil.

Significantly reduced demand for jet fuel as airlines scale back their schedules

A rush by investors to cash in positions built up over the last two weeks.

Repeated pledges by oil producers' cartel Opec to guarantee supplies.

Opec members are thought to have found it difficult to enact output cuts promised earlier this year in an attempt to support prices.

"They are only about half way to cutting the million [barrels] in September," a leading sector analysts said.

Weak position

Nauman Barakat, of ABN Amro bank in New York, said: "Opec's position has weakened significantly."

Oil prices, which Opec has attempted to keep within a $22-28 target range, as measured by its own benchmark, could fall still lower, Mr Barakat said.

Kuwaiti oil minister Adel al-Sebeih said on Monday that Opec was "comfortable" with prices towards the lower end of this range.

But some analysts say the oil price will drop below the range, leaving Opec facing a difficult dilemma.

"Prices could be heading back toward the long-term norm of $18 for Brent and $20 for U.S. crude," said Mr Barakat.

But any decision to cut oil production by Opec would be seen as especially unhelpful by the West, given the current difficulties facing the world's economy.