Oil fell more than $7 today, dropping below $80 a barrel for the first time in a year, pressured by expectations fuel demand growth will shrivel if the credit crisis pushes the world economy into recession.
Economic weakness spurred the International Energy Agency (IEA) to cut its forecasts for world oil demand growth for 2008 to its lowest rate since 1993.
U.S. light crude for November delivery was down $6.74 at $79.85 a barrel by 13.35 GMT. It touched a session low of $78.61, its lowest since October 2007.
Prices have dropped nearly 45 percent from a peak of $147.27 in July.
London Brent crude was down $6.17 a barrel at $76.49, also below $80 for the first time in a year.
The IEA, which advises 28 industrialised nations, cut its world demand growth forecast for 2008 to 0.5 percent -- the lowest in percentage terms since 1993.
The agency said the impact of global economic weakness was most acute in developed countries, while developing countries were showing "a degree of resilience."
Commodities have tumbled this week along with global stock markets, which suffered heavy losses in Asia, with the Nikkei index down nearly 10 percent. European shares were down about 9 percent.
The Dow Jones industrial average was down about 7 percent shortly after trading opened.
FLIGHT TO SAFETY
Investors, who earlier this year piled into oil and other commodities as a hedge against inflation and the weak dollar, now want safety.
"Commodity indices suffered heavy losses over the past week as market sentiment continue to focus on the potential demand-side weakness associated with the ongoing instability in the financial sector," Barclays Capital said in a note.
A key question is how far will prices fall.
"We find oil prices would need to fall to $35 a barrel in order to bring prices in real terms back to their long run historical averages," Deutsche Bank said in a note.
But it also said that, given the geographical location of marginal demand and supply, $60 a barrel was a more realistic characterisation of "cheap" oil.
Gold, a traditional safe haven, jumped more than 2 percent on Friday to a 2-1/2 month high of $931 an ounce.
Investors will this weekend look to Washington, where finance ministers and central bankers from the Group of Seven nations will meet to look for ways to contain the crisis.
The Organization of the Petroleum Exporting Countries has called an emergency meeting in Vienna on Nov. 18 to discuss the impact of the global financial crisis on the oil market.
"OPEC appears to be scrambling to put in another, firmer floor at $80," said Jonathan Kornafel, Asia director of U.S. based options trader Hudson Capital Energy.
"The market may still overshoot on the downside regardless of what OPEC does, as financial flows continue to pour out of commodities," he added.