NEW YORK (AP):

Oil prices extended their retreat Tuesday, shedding US$10 a barrel in a violent, two-day slide as tumult on Wall Street dims hopes for a swift economic recovery and signals another drop in US energy demand.

Light, sweet crude for October delivery fell US$4.56 to settle at US$91.15 a barrel on the New York Mercantile Exchange, after earlier dipping to US$90.51, its lowest level since February 8. On Monday, prices closed below US$100 for the first time in six months, shedding more than US$5 and wiping out all of oil's gains for the year.

Crude has fallen about US$55 - or 37 per cent - since shooting above US$147 on July 11.

As uncertainty grips Wall Street, evidence mounted that US consumers and businesses were bracing for a protracted economic downturn that should guarantee more of the money-saving energy conservation measures of the past year: Americans will cut back on driving, airlines will keep fewer planes in the air and US manufacturers will be shipping fewer products. That, in turn, was expected to keep crude prices down.

Unavoidable

"The economic slowdown is completely unavoidable now and people will be driving less, trucking less and buying less," said James Cordier, president of Tampa, Florida-based trading firms Liberty Trading Group and OptionSellers.com. "Energy consumption will fall dramatically."

Oil's steep correction comes as traders were riveted by rapidly unfolding events on Wall Street. Fears rose Tuesday about the health of insurance giant American International Group Inc after several ratings agencies reduced their ratings on the company. That amplified worries of more turmoil after Lehman Brothers Holdings Inc filed for bankruptcy and Merrill Lynch & Co was bought by Bank of America Corp in a rush sale intended to save the troubled company.