Fears of recession send oil price down by 6%

Brent Crude

Oil price has slumped 6 per cent amid growing fears of a global recession as the US Federal Reserve said consumer spending had ground to a halt even before last week's outrage.

Brent crude plunged $1.42 to $26.16 (£17.89) a barrel following a fall of more than a dollar on Tuesday. The price had surged over the $30 mark immediately after the attacks, as traders feared it would trigger a fresh crisis in the Middle East.

But yesterday analysts said fears of recession were rapidly overtaking the threat of a repeat of the price spike seen during the 1991 Gulf war.

"My gut feeling is that the recessionary effects will, over time, outweigh the [military] hype," said Nigel Saperia, a trader at Glencore in London.

Fears of recession were heightened by the "Beige Book", the Federal Reserve's monthly survey of American regions, that showed growth was "sluggish" even before the attacks.

The Fed said consumer spending was "flat to down" in the period up to 10 September. The gloomy report has raised the likelihood of another 0.5 per cent cut in interest rates when the Fed meets on 2 October.

"Undoubtedly, consumer sentiment – which already was not so robust – will be further dampened by these shocking events," said Carl Weinberg at High Frequency Economics in the US.