Oil prices on Tuesday tumbled below $60 a barrel, their lowest level in 20 months, amid worries that the global economy was slowing more rapidly than expected.

The drop led a broad retreat in commodity markets, with the Reuters-Jefferies CRB commodity index down 3.5 per cent to its lowest level in almost five years.

The fall will further reduce inflationary pressures as central banks slash interest rates.

The sharp fall in oil and commodities prices came as the rally triggered by the announcement of China's record spending stimulus mutated into fresh concerns about its economic health.

In New York, Nymex December West Texas Intermediate oil prices fell to an intraday low of $58.32 a barrel, down almost $4. It settled $3.08 lower at $59.33. ICE December Brent in London fell below $55 a barrel for the first time since January 2007 but rallied to trade $3.37 off at $55.71

In response, several Opec members said they were now supporting further production cuts and even a meeting before their next scheduled gathering on December 17.

Gholam-Hossein Nozari, Iran's oil minister, warned the market was still oversupplied in spite of Opec last month agreeing to cut its production quota by 1.5m barrels a day.

He said: "The [previous] decision by Opec was able to prevent a large decline in prices but as for the stability of prices, this needs a more far reaching decision and further measures."

Traders said they were anticipating a large cut in the International Energy Agency's forecast for demand for this year and 2009, to be published tomorrow. Some traders said the IEA could signal a contraction in crude oil consumption, the first since 1983.

Raymond Carbone, of Paramount Options in New York, said oil prices were reacting to demand weakness, falling equity prices and a stronger US dollar.

The options market priced a growing likelihood that oil prices could sink as low as $50 a barrel by next week, with the cost of insuring against such event on Tuesday jumping almost 40 per cent.

Mr Carbone added that option trading was affecting price action in futures, exacerbating the drop. He said: "Options are coming into play, particularly between $55 and $50 a barrel."

US natural gas prices fell sharply, down 4.5 cents, or 6.2 per cent, to $6.800 per million British thermal units, in spite of forecasts for cold weather across the eastern US and Canada.

Sliding oil prices and a stronger dollar weighed on gold which fell 2 per cent to $730.30 a troy ounce.

Among the other precious metals, silver lost 5.1 per cent to $9.66 a troy ounce while platinum sank 3.9 per cent to $814 a troy ounce.

Base metals retreated as officials in China admitted that plans for a $586bn government economic package were unlikely to provide an immediate boost to demand.

Wen Xianjun, vice president of the China Nonferrous Metals Industry Association said: "The stimulus plan will show effect slowly. It will be very difficult for metals prices to rally next year."

Producers are cutting base metals output in response to falling prices.

Aluminium lost 1.8 per cent at $1,950 a tonne as Alcoa, the US producer announced further output cuts, slashing another 350,000 tonnes of capacity, due to weakening demand.

Copper lost 7.0 per cent to $3,635 a tonne, nearing its lowest level since 2005.