Oil prices fall below $60 a barrel as markets recoil from last week's stock market drop

(AP) Oil prices dropped sharply Monday, losing nearly $2 a barrel, in a market driven by stock market declines and concerns about the world economy.

"There's a general sort of recoil from risk in the market," said Tobin Gorey, a commodity strategist with the Commonwealth Bank of Australia in Sydney.

Light, sweet crude for April delivery tumbled $1.82 to $59.82 a barrel in midday trading on the New York Mercantile Exchange. Earlier, the contract dropped as low as $59.64 a barrel.

Brent crude for April also fell $1.86 to $60.22 a barrel on the ICE Futures exchange in London.

"There are still ongoing ramifications from China's drop last Tuesday," Gorey said, noting that most Asian equity markets were also down on Monday. "It was a jolt to the global economy."

Last Tuesday, the benchmark Shanghai Composite Index plunged 9 percent, triggering huge losses on Wall Street and other markets. The oil market still closed at a two-month high on Thursday on the news of tightening gasoline supplies, but afterward followed the stock market's downward pull.

The Dow Jones industrials inched up in midday trading on Monday, gaining 3.92 points to 12,118.02, but remained far off last Monday's closing of 12,632.26.

Comments from an oil official that the Organization of Petroleum Exporting Countries is unlikely to call for another round of production cuts at its March meeting also undermined oil prices. Qatar's Oil Minister Abdullah bin Hamad al-Attiyah said the cartel won't decrease production if crude oil stays near its current basket price of $58.34 a barrel, according to Dow Jones Newswires.

Oppenheimer & Co. Analyst Fadel Gheit said that OPEC aims to keep oil within $55 and $65 a barrel. "Now at $60 a barrel is the sweet spot," Gheit said. "It will not kill demand growth for oil. It will slow it, but we won't see people running to conserve energy. People will get used to it."

Escalating tensions between Iran and the United States have buoyed prices lately, but reports on Monday that Iran may participate Saturday in an international conference on Iraq with the United States in attendance also may have "alleviated some of the political premium in the price," of oil, Gheit said.

If both countries attend, it would be the first public U.S.-Iranian meeting in nearly three years.

Washington is pushing for tougher U.N. sanctions on Tehran over its failure to comply with demands to halt its uranium enrichment program. Although the United States has said it has no plans for a military strike, the option has not been ruled out.

Jan Stuart, an analyst at UBS in London, said fundamentals for oil remained good, with strong U.S. oil demand, low imports and reduced refiner supply.

"Far below consensus non-OPEC growth, and demand strength from outside North America" were other supporting factors, Stuart said.

Last week's U.S. inventories report showed stockpiles of gasoline and distillates, which include heating oil and diesel fuel, dropped by a larger amount than analysts had forecast. Meanwhile, demand for products over the last four-week period rose by 7.5 percent from the same period last year.

In other Nymex trading, heating oil futures fell nearly 5 cents to $1.7196 a gallon, while natural gas gained nearly 3 cents to $7.271 per 1,000 cubic feet. Gasoline futures fell more than 5 cents to $1.8500 a gallon.