LONDON (AFP) - World oil prices dived yesterday, with New York light sweet crude down nearly 3.0 dollars, as massive falls on world stock markets left traders worried about risky investments in commodities, analysts said.
The price of London's Brent North Sea crude for September delivery sank 2.40 dollars to 69.56 dollars per barrel.
New York's main futures contract, light sweet crude for delivery in September, shed 2.75 dollars to 70.58 dollars per barrel.
"Crude futures were sharply lower ... in both London and New York, reversing Wednesday's gains amid more risk aversion and as credit woes worsened," Sucden analyst Andrey Kryuchenkov said.
Global equity markets shed tens of billions of dollars in value yesterday owing to mounting concerns about a possible global economic slowdown caused by problems in the US housing market.
Sliding shares are fuelling risk aversion among investors, who are pulling money out of assets they perceive as risky, such as oil, in favour of safer government bonds and currencies like the dollar.
Some traders are also liquidating their holdings in oil futures to cover losses in other markets, analysts said.
"Oil is still being pressured by the equity markets," said Olivier Jakob, an analyst at Petromatrix.
Added to the picture, many traders fear that the current stock market downturn could feed through into slower global economic growth -- and falling demand for crude oil.
Last week, crude futures shed more than 7.0 percent in London and almost 6.0 percent in New York as traders fretted over the impact on oil demand.
Prices were also pushed lower yesterday by reports that Tropical Storm Dean would likely spare key US oil facilities in the Gulf of Mexico.
"A combination of the hurricane veering away from the Gulf and weakness on the stock markets could see prices coming down more," Bache Financial trader Christopher Bellew said.
Worries about the the storm and news that US crude inventories had tumbled last week sent oil prices rising on Wednesday.
The US Department of Energy had revealed that US crude inventories had slumped by 5.2 million barrels last week -- more than double a fall of 2.5 million forecast by analysts.
"In the short term, financial market movements are likely to remain a key driver of price direction," Barclays Capital analysts said.