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Singapore, Sept 6, 2011 (AFP)
New York crude prices plunged below $85 in Asian trade Tuesday as eurozone debt worries and weak Chinese service sector growth reignited recession fears, analysts said.

New York’s main contract, light sweet crude for delivery in October, dived $2.82 to $83.63 per barrel.

Brent North Sea crude edged up 29 cents to $110.37, with analysts suggesting the small recovery was because the contract has been oversold in recent days.

Crude markets were hit after the European Central Bank (ECB) called for the enactment of a second debt rescue for Greece, said Ker Chung Yang, a Singapore-based commodity analyst at Phillip Futures.

“The eurozone debt crisis is a hot topic for 2011, and is one of the factors that will lower the demand for growth,” he told AFP.

“In the commodities market, even the equities market, there are fears of another recession,” Ker added.

ECB head Jean-Claude Trichet warned Monday of an immediate and imperative need for enactment of a second debt rescue for Greece, and for tightened discipline in the management of eurozone economies.

He also spoke of an eventual “confederal” disciplined management of eurozone national finances.

The head of the International Monetary Fund Christine Lagarde repeated her warning that banks in Europe need extra capital to withstand any contagion from the eurozone debt crisis.

In Asia, indications that China’s service sector growth was stuttering also impacted crude prices, Ker said.

“China’s service sector’s growth in August is at the lowest pace in record, as shown by a HSBC PMI (Purchasing Managers’ Index) data,” he added.

Data released by HSBC on Monday showed China’s PMI in August dropping to 50.6 from 53.6 in July.

The figures indicate a slowdown in the world’s largest energy consumer, which has dire ramifications for crude as well as the global economy.

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