Brent oil slumps under $90

London - Brent oil prices tumbled Thursday to a two-year low under $90 per barrel as gloomy German economic news sparked fresh demand concerns in a market already hit by abundant supplies.

Brent North Sea crude for delivery in November dived to $89.90, the lowest level since June 25, 2012. The contract later stood at $90.18, down $1.20 from Wednesday.

US benchmark West Texas Intermediate (WTI) for November slid to an 18-month trough at $85.60 a barrel. It later pulled back slightly to $85.81, down a hefty $1.50.

Financial markets were hit by downbeat data, a cut in the growth forecasts of the eurozone's economic powerhouse Germany and a new IMF warning on recession.

Crude futures had struck similar lows on Wednesday after the weekly US petroleum inventory report showed mounting stockpiles in top oil consumer the United States, signalling weakening demand.

"Brent's drop below the $90 level is another bearish development and suggests the market is not only worried about the excessive supply of oil, but now about demand too," Forex.com analyst Fawad Razaqzada told AFP.

"All of a sudden, a recession for Germany looks imminent, which does not bode well for the eurozone as a whole with Germany being the economic powerhouse of the single currency bloc."

The outlook darkened as top think tanks slashed their forecasts for German growth both this year and next.

The four institutes - Ifo in Munich, DIW in Berlin, RWI in Essen and IHW in Halle - predicted the German economy would grow by 1.3% in 2014 and 1.2% in 2015. That is much lower than the 1.9% and 2.0% they had previously expected.

Compounding the gloom, International Monetary Fund (IMF) chief Christine Lagarde warned Thursday that there was a 35-40% chance of the eurozone slipping back into recession if action is not taken to prevent it.

The warning came after the IMF on Tuesday cut its projection for world economic growth this year and next, and warned of stagnation in developed economies.

The oil market had also fallen on Wednesday after news that American crude stockpiles increased last week by far more than market expectations.

The Department of Energy said US crude reserves soared 5.0 million barrels in the week ending October 3.

Earlier this year, European benchmark Brent oil had peaked at $115.71 per barrel in mid-June, but has since slumped on the back of abundant supplies, tepid demand and the strong dollar.

"Most if not all of the recent news flow has been price-negative, with demand forecasts being revised lower while supply continues to rise," said Saxo Bank analyst Ole Hansen.

"Supply gains are being posted by both the US and among OPEC members who continue to produce more than their stated target of 30 million barrels per day."

In recent months, the market has faced a raft of downgrades to growth forecasts for global oil demand.

Mounting economic concerns in China and the eurozone have also sparked stubborn worries over demand for crude.

At the same time, buoyant supplies in the United States - boosted by surging shale energy production - have dimmed US demand for oil.

Added to the picture, geopolitical concerns in major energy-producing regions like Iraq and Ukraine have failed to cause major disruptions to global oil supplies, analysts say.