NEW YORK - Oil prices closed below $100 a barrel for the first time in six months Monday, tumbling in another dramatic sell-off as the demise of Lehman Brothers and the sale of Merrill Lynch deepened worries about the U.S. economy.
Crude prices shed more than $5 a barrel and have now given up virtually all their gains for the year, extending a steep, two-month slide from record levels above $147 a barrel.
Oil's pullback also came as early signs suggested that Hurricane Ike delivered less damage than feared to the Gulf Coast energy oil and gas infrastructure. But pump prices jumped above $4 a gallon in parts of the nation as a precautionary shutdown of Gulf refineries caused gasoline shortages.
The latest sell-off in oil began Sunday and accelerated Monday as traders digested a day of dramatic upheaval on Wall Street: Lehman Brothers Holdings Inc., a 158-year-old investment bank, filed for bankruptcy after failing to find a buyer and Merrill Lynch & Co. agreed to be bought out by Bank of America Corp.
Lehman, Merrill and other big institutional investors were major participants in the commodities boom of the past year, helping push the price of oil, precious metals and grains to historic highs until a slowing global economy helped bring a halt to the rally. Analysts said investors feared that the upheaval in the financial sector could trigger another round of commodities liquidation. Other investors may also unload commodities, fearing that the deepening economic crisis will further reduce demand for energy and raw materials futures.
"I think this is giving the bulls further reason to exit the market," said Stephen Schork, an oil analyst and trader in Villanova, Pa., who said the pullback could reflect selling by Lehman or possibly a hedge fund struggling to raise capital. "When you see price drops of this size, it reeks of someone being in trouble."
Light, sweet crude for October delivery fell $5.47 to settle at $95.71 a barrel on the New York Mercantile Exchange -- oil's first settlement under $100 since March 4. Earlier, prices dipped to $94.13, the lowest trading level in seven months. The sell-off gained momentum in aftermarket trading as prices fell more than $6.50.
U.S. officials said Sunday that Ike destroyed at least 10 oil and gas platforms and damaged pipelines in the Gulf of Mexico. But that represents only a small portion of the 3,800 production platforms in the Gulf.
