The New York Mercantile Exchange (Nymex) July crude contract, trading on the out of hours access electronic trading system, fell to dollar 12.35 per barrel-the lowest level since October 1988.

It surpassed the previous low of $12.50, which was tested but not broken in New York's open outcry trading on Friday.

"Right now it's off in extremely light volume, so I don't know the significance of this," a New York broker said.

Brent crude futures, trading on the Singapore International Monetary Exchange (Simex) closed at $12.40 per barrel, for a loss on the day of just one cent.

Traders said the brent slide was smaller because the July contract was due to expire later on Monday, limiting the sell pressure.

The Nymex slide occurred after middle-east Gulf oil producers, which sit on 65 per cent of global oil reserves, offered little to stirthe market bulls after a weekend of consultations led by Iraninan oil minister Bujan Zanganesh. Oil markets have been looking for hard evidence of production cuts to slow down supply, which the International Energy Agency (IEA) estimates is running more than 1.5 million barrels per day (bpd) above expected demand for 1998.

Prices are now languishing at the lowest levels in real terms since the 1970's. In actual price terms, oil is now $6/$7 per barrel below those of one year ago.

Signs that crude futures were going to hit fresh 10-year lows came on Friday as sellers tested the strength of market support at $12.50. The price level held.

On access trading today, prices opened slightly higher but soon fell back."We opened higher, but that was just one trade. Then we went right down to Friday's New York close. We have just drifted since then," one broker said.

In the absence of real production cuts, traders are sceptical there is any reason to buy.

Asian oil demand, until last year the engine of globaldemand growth, has slumped in the face of Asian economic crisis.

With Japan recording recession type economic growth figures on Friday and China's economy sliding down, forecasters are worried that Asia could see a decline in demand this year.