Oil drops to one-year low

Oil is starting the last quarter of 2011 at the lowest level in more than a year as Greece's debt crisis and the possibility of another recession spooks investors.

Benchmark crude on Monday fell 59 cents to US$78.64 per barrel in early afternoon trading in New York. Prices were higher after tumbling as low as US$76.85 earlier in the day.

Oil hasn't been that low since September 2010.

In London, Brent crude dropped 36 cents to US$102.40 a barrel.

An ongoing worry for investors in recent months has been Greece's debt problems and their impact on the rest of Europe. Greece has been relying on international aid to pay its bills, but further loan instalments may be in jeopardy.

Without more help, Greece will start running out of money in two weeks. A Greek default could spread to neighboring countries and possibly trigger widespread banking problems. That would hamper world energy demand as lending slows down and businesses cut spending.

Meanwhile, manufacturing surveys out of China pointed to weaker activity in September as prices for raw materials rose.

One survey suggested manufacturing was stagnant, while another showed slight improvement. Both were disappointments for oil analysts and traders.

Since peaking near US$114 per barrel in May, benchmark oil has dropped about 30 per cent.