The oil price was plummeting on Tuesday, registering its biggest falls in four years and down below $90 a barrel — less than a week after it crashed back through $100 a barrel.

Trading in the global commodity markets was frantic overnight, with traders in the Far East talking of “total panic”.

With the price of oil crashing overnight, Brent Crude opened in London today at as low as $89.80 before stepping back marginally to trade at $90.24, a fall of $4 from its close last night. The price of US oil on the Nymex exchange also plummeted, falling $3.57 to $92.14.

The latest falls — the crash since the start of this week represents the worst two-day performance for oil since 2004 — means the price of oil has now come back nearly 40% since the peak of more than $147 a barrel in early July.

The plunge in the price of oil comes on the back of fears for the state of the US economy, the world's largest, which is in a serious downturn and now in the throes of financial crisis.

“Prices were too high because we're looking at a recession — we're looking at dropping demand,” said Peter Beutel of US energy consultants Cameron Hanover. “Oil is not a safe haven.”

The fall in the price of oil is being seen as more remarkable as it comes against a backdrop of hurricanes in the Gulf of Mexico, the main US producing area, and indications from the Opec cartel of major oil producers that it will slow output to force the price up.

The oil price had surged through last year to this summer on soaring demand in Asia and especially China in the run up to the Olympic Games.

Industry figures, however, are now suggesting demand falling over the next year on the back of recession among major Western economies and falling demand from China.

Many believe the oil price had also been talked up by speculators and the current slump in price followed their exit from the market.