Updated: Oil price plunges in New York

Oil prices fell more than five percent today as the unprecedented downgrade of the United States's credit rating shook financial markets and sparked fears of slowing global energy demand.

New York's main contract, West Texas Intermediate (WTI) light, sweet crude for delivery in September, fell $5.57 to close at $81.31 a barrel, its lowest level since November.

In London, Brent North Sea crude for September tumbled $5.63 to settle at $103.74 a barrel on the IntercontinentalExchange.

Standard & Poor's lowered the United States's long-term sovereign debt rating from AAA to AA+ late Friday evening, citing Washington's inability to rein in its mounting deficits.

The historic move sent tremors through financial markets, which have already been shaken by fears of a new economic slowdown in the United States and concerns over Europe's deepening debt crisis.

"In the tumultuous aftermath of the US downgrade from S&P, the world also is downgrading the oil market," said Phil Flynn, an analyst with PFG Best.

A fresh economic downturn in the United States, the world's largest consumer of oil, would take a deep bite out of global energy demand. Some analysts say the country may be on the brink of entering a double-dip recession.

In addition, fears that Europe's debt crisis could be spreading to Italy, the eurozone's third-largest economy, have sapped investor confidence in recent days.

Monday's global sell-off was "a complete flight from risk", said Matt Smith, an oil analyst with Summit Energy. "People are just getting out of their positions because the future looks so uncertain," he said.