Oil prices fall on demand fears

LONDON (AFP) - World oil prices slid on worsening worries about a potential drop in energy demand owing to the weakness of the US economy, analysts said Monday.

New York's main contract, light sweet crude for delivery in February, shed 1.72 dollars to 88.85 dollars per barrel in electronic deals.

Brent North Sea crude for March delivery slumped by 1.51 dollars to 87.72 dollars in electronic trade.

"Oil prices have come off as market participants are concerned over potentially slower global growth and its effect on oil demand growth," said Sucden analyst Nimit Khamar.

"It looks like persistent economic concerns are now overshadowing any bullish tendencies or factors that drove crude prices to record highs earlier this month."

Prices remain at high levels but have shed more than 10 dollars since striking a record in New York of 100.09 dollars per barrel in early January.

"There were a number of developments which would have driven oil prices higher (Monday) had the market not been under pressure from a potential global recession," said Khamar.

The Sucden analyst pointed to recent comments by OPEC that the market is well supplied and unrest in major oil producer Nigeria as news that would normally send crude prices skywards.

A major oil pipeline belonging to Italian oil company Agip caught fire and a tanker truck exploded in separate incidents Monday in southern Nigeria, military and industry sources said.

The oil pipeline at Omoku in Rivers state had been ruptured before it caught fire early Monday, the sources said. It was not immediately clear if anyone was hurt in the incident.

The two incidents came barely one week after the most prominent militant group in the restive Niger Delta claimed responsibility for a series of attacks.

Instability and violence slashed oil output in Nigeria, the world's eighth-largest crude exporter, by a quarter in 2006 and 2007 to 2.1 million barrels per day, according to the latest estimates.

Traders are also looking ahead to the February 1 meeting of the Organisation of the Petroleum Exporting Countries in Vienna.

Last week US President George W. Bush voiced hope that OPEC would increase oil output at its upcoming meeting to combat high crude prices, after talks with King Abdullah of Saudi Arabia, the world's top oil producer.

OPEC ministers insist that geopolitical unrest and heavy oil buying by speculators are the reasons behind elevated prices.