NEW YORK, Oct 6, 2008 (AFP) - Crude oil nosedived below 90 dollars a barrel Monday as deepening global financial turmoil and plunging stock markets raised fears about slowing demand for energy.

New York's main contract, light sweet crude for November, plunged 6.07 dollars to close at 87.81 dollars a barrel.

In London, Brent North Sea crude for delivery in November tumbled 6.57 dollars to settle at 83.68 dollars a barrel.

Earlier the two futures contracts had fallen to lows last seen in early February, at 87.56 dollars in New York and 83.36 dollars in London.

Crude futures contracts skidded as global stock markets tumbled after a 700-billion-dollar US financial rescue package signed into law Friday failed to calm investors' nerves about frozen global credit flows.

'The oil market is trying to find out exactly how it fits into this new world economic of bailouts and global economic turmoil. Oil is not the best hedge against a market meltdown and China and India (demand) will slow,' said Phil Flynn at Alaron Trading.

Crude prices have slumped about 40 percent in three months since they struck record highs of above 147 dollars in July.

'The buying frenzy that engulfed the oil market in the beginning of this year is about to go into reverse and the myths that the oil bulls tried to feed us are coming apart at the seams. The world is going to feel the effects of this global credit crisis,' Flynn said.

According to US Department of Energy data, oil consumption in the world's biggest energy consumer dropped 7.1 percent in the past four weeks, compared with the same period a year ago, to 19 million barrels per day.

'The contagion is spreading. China will not be importing gasoline in October, for the second successive month as domestic stockpiles mount,' said John Kilduff at MF Global.

China and other major emerging economies currently drive global energy demand, which is waning under pressure from worldwide financial crisis stemming 14 months ago from a slump in the US housing sector.

'The risks of a severe international economic slowdown, possibly extending to a recession in some developed economies, have increased as a result of the recent strains in the international financial system,' said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney.

'If there is a severe downturn in the international economy, oil prices could prove weaker than forecast,' he said.