NEW YORK (Reuters) - Oil prices fell 5 percent to $59 a barrel on Tuesday as the deepening global economic crisis dragged down markets and raised expectations of further slowdowns in energy demand.
U.S. crude settled down $3.08 at $59.33 a barrel, the lowest settlement since March 2007, after touching $58.32 earlier. London Brent crude fell $3.37 to settle at $55.71 a barrel.
U.S. stocks tumbled on aluminum maker Alcoa setting production cuts, fears of a cash drain at automaker General Motors and signs the Chinese economy was faltering.
Slumping demand has knocked crude off record highs of over $147 a barrel in July as big consumer nations felt the squeeze of the global credit crunch.
Economists slashed oil demand expectations due to the economic slowdown in top consumer the United States and Europe. Some said total global oil demand could contract next year and prices could be hit further.
"Crude prices were slammed into a new low ground again today on the impact of another financial 'double whammy' in the form of a renewed drop in the Dow and sizable increase in the value of the U.S. dollar against the euro," said Jim Ritterbusch, president of Ritterbusch & Associates.
The U.S. dollar rallied against a basket of currencies on Tuesday as global economic worries prompted investors to shun riskier assets and flock to the safety of the greenback. A firmer dollar makes oil more expensive for holders of other currencies and tends to pressure the crude price lower.
Concern about China's economy was spurred by customs data which showed import growth slowed in the world's No. 2 oil consumer in October.
Oil prices jumped 2 percent on Monday after China announced a $600 billion economic stimulus plan.
"I think people got a little carried away yesterday with the Chinese fiscal package and the impact it may have on oil prices and after a morning rally reality set in," said Robert Laughlin at MF Global in a research note on Tuesday.
An OPEC source said the cartel may cut oil output by a further 1 million barrels per day when it meets next month in Algeria because of slowing world demand.
U.S. weekly inventory data was expected to show an 800,000-barrel rise in crude stocks last week as demand continues to slow, according to a Reuters poll of analysts.
Distillate stocks should rise by 500,000 barrels and gasoline by 800,000 barrels, according to the poll. The data will be released on Thursday this week, a day later than usual due to Tuesday's U.S. Veterans Day holiday.
Additional reporting by Matthew Robinson, Gene Ramos and Robert Gibbons in New York, Christopher Johnson in London, James Topham in Tokyo and Jonathan Leff in Singapore; Editing by Christian Wiessner