Oil price falls on demand worries

WORLD oil prices fell by more than $US1 in Asian trade today amid fresh concerns that energy demand would be affected by the slowing US economy, dealers said.

Concerns over the US economy, the biggest oil consumer, resurfaced after the OECD reduced its US growth forecasts for the first half of this year and said the world's largest economy was teetering on the brink of recession.

In morning trade, New York's main oil futures contract, light sweet crude for delivery in May, tumbled $US1.51 to $US100.33 ($111) per barrel.

The contract closed at $US101.84 on Thursday, at one time sinking to below the $US100 level. Markets were closed Friday for a public holiday.

London's Brent North Sea crude for May delivery fell $US1.18 to $US99.20, after settling at $US100.38 on Thursday.

"The $US100 mark is going to be a support level and prices may congest around that level" as the market focuses on the weakening US demand, said Tony Nunan, of Mitsubishi Corp's international petroleum business in Tokyo.

"People are afraid that Bear Stearns is not the only bank in trouble. There is a lot of talk that there could be bigger problems hidden in the US economy," said Nunan.

Bear Stearns, formerly among the biggest financial giants, was ravaged by the US subprime mortgage crisis and agreed to sell out to JPMorgan Chase for a paltry $US236 million after rival banks stopped trading with it.

The Paris-based Organisation for Economic Cooperation and Development (OECD) said the US economy was now expected to grow 0.1 per cent in the first quarter, down from the 0.3 per cent estimated in December, and would display zero growth in the second, compared with 0.4 per cent given previously.

A growing number of US economists believe the economy of the world's biggest oil importer is already in a recession.

OECD analysts believe US growth will falter in part due to the ongoing housing downturn, which they said would likely dampen home prices "for some time to come."

New York oil prices scaled a record high of $US111.80 last week as the dollar dived against the euro and as investors sought a safe refuge for their cash instead of the volatile equity markets.

The weak US currency encourages demand for dollar-priced commodities, which become cheaper for buyers using stronger currencies.