Mumbai: Crude oil prices plunged to below $97on the prospects of a fall in energy demand amidst worsening global financial crisis and a rising dollar.

US light sweet crude for October delivery fell $4.40 to $96.78 a barrel on the New York exchange. North Sea Brent crude for October delivery tumbled to $92.84 a barrel - the lowest level since February. It later recovered slightly to stand at $93.42, still down $4.16 a barrel.

News that damage to US oil platforms caused by Hurricane Ike has not been as severe as feared also weighed on crude oil prices. US oil refineries in the Gulf of Mexico are now preparing to resume operations.

Crude prices are down more than a third from record levels of above $147 reached in July, as investors fear a weakening of energy demand amid signs of a global slowdown.

Stock markets across the world plunged between three and seven per cent on concerns over the beleaguered world economy.

The European Central Bank and Bank of England responded to the latest gloom by pumping billions of dollars into world financial markets

Oil prices also ignored OPEC plans for an output cut as fear of future supply shocks disappeared amidst a drop in demand within Organisation for Economic Cooperation and Development (OECD).

The fall in crude prices bode well for oil retailing companies as it may help them  reduce losses with minimum support from the government.

The petroleum ministry, in fact, is considering a proposal to reduce diesel prices if crude oil prices fall below $85 a barrel.

While the OPEC has reduced oil production by 500,000 barrels from this month, the International Energy Agency (IEA) has cut oil demand projections for the next 15 months.