The stunning collapse in oil markets accelerated Friday, sending a barrel of crude plunging below US$78 as investors grow more pessimistic about resolving a mushrooming global economic crisis.

Oil has not been this cheap in 13 months - a rare silver lining for consumers amid a rapidly imploding financial landscape.

Crude prices cut

Crude prices have almost been cut in half since surging to a record near $150 barrel over the summer.

Energy experts believe prices could go even lower.

Friday's steep losses came as Wall Street capped its worst weekly drop ever with another wild session. The Dow Jones industrial average fell as much as 700 points earlier in the day before gyrating in and out of positive territory and later finishing the day down 128 points.

Frenzied trading

The frenzied trading weighed heavily on oil markets, sending prices plummeting more than US$9 a barrel at one point.

"There's so much fear out there and that's really gripping the oil market. People are just afraid to hold a position, so they're closing out and selling off," said Michael Lynch, president of strategic energy and economic research in Winchester, massachusetts.

Light, sweet crude for November delivery ended the day US$8.89 lower at US$77.70 a barrel on the New York Mercantile Exchange. It was the lowest settlement price for a front-month crude contract since September 10, 2007.

In London, November Brent crude lost US$8.57 to settle at US$74.09 a barrel on the ICE Futures exchange.

"As long as this financial crisis continues, we could see prices go down into the US$60 range," Lynch said.

47 per cent loss

Oil has now lost 47 per cent of its value since hitting a record US$147.27 on July 11 as a deepening credit crisis sparked by the subprime mortgage fiasco wreaks havoc around the globe and drives down energy demand.

"The fundamental game for oil has changed. In the last decade, oil went up because of strong global economic growth. That story for the near term is over, so everybody has to re-evaluate," said Phil Flynn, energy analyst at Alaron Trading Corp in Chicago.

The Organisation of Petroleum Exporting Countries (OPEC) signalled it may tighten output to put a floor under falling prices, but it did not seem to matter.

OPEC said Thursday it would hold a special meeting November 18 to discuss how the economic crisis is affecting oil prices. The head of Libya's national oil company, Shukri Ghanem, called on oil producing nations to cut output.

Many doubt that an OPEC cut would reverse the extreme downward momentum on oil. OPEC's decision last month to cut production by 520,000 barrels a day did little to stop the losses.

Flynn said another output cut "may actually accelerate the slide".

"What's driving this market right now is fear of demand destruction and lack of credit," he said. "If you can't borrow money to buy crude, then demand falls more and so do prices."

- AP