Oil drops $5 to below $89 on demand concerns

NEW YORK (Reuters) - Oil dropped more than $5 to below $89 a barrel on Monday on expectations the growing financial crisis will further slow already faltering global fuel demand.

U.S. crude traded down $5.08 to $88.80 a barrel at 1:02 p.m. EDT (6:01 p.m. British time) after earlier touching $88.57, the lowest level since early February. London Brent crude fell $5.30 at $84.95 a barrel.

Crude prices have plummeted from a peak over $147 a barrel on July 11 as high fuel prices and the growing financial crisis slow oil demand in top consumer the United States and other industrialized nations.

"The prevailing macro sentiment is now crystallizing around the notion that we are heading into a synchronized global slowdown, a mirror image of the across-the-board expansion we saw from 2004 to early 2007," said Edward Meir of broker MF Global.

Analysts are now eying demand from China -- which helped fuel a six-year rally in commodities -- for signs the crisis is hitting consumption.

The world's second biggest consumer will not import gasoline for the second straight month and instead export the fuel due to heavy domestic stockpiles and a dip in demand.

"I think the market's starting to build this into prices," said Mark Pervan, senior commodities analyst at ANZ.

"You would expect the market is now joining the dots and thinking ... this will probably flow through to China."

The U.S. and European governments are trying to underpin the financial sector but this has so far failed to reassure investors.