UPDATE 11-Oil drops $5 to below $89 on demand concerns

                                
 * Credit crisis fallout seen hitting oil demand
                                
 * Concerns contagion could spread to Chinese consumption
                                
 * Global stocks markets tumble
                                
 * Price drop worries come OPEC members
                                
 (Updates prices, adds Iraq oil minister comment)
                                
 NEW YORK, Oct 6 (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 <CLc1> traded down $5.08 to $88.80 a barrel at
1:02 p.m. EDT (1701 GMT) after earlier touching $88.57, the
lowest level since early February. London Brent crude <LCOc1>
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 eyeing 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.
[ID:nSP7350]
                                
 "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.
                                
 U.S. stocks fell on Monday, with the Dow diving 400 points
to below 10,000 for the first time in four years, as part of a
global sell-off on investors fears the widening fallout from
the credit crisis would drag the economy into recession.
[ID:nN06161659]
                                
 European shares suffered their worst one-day percentage
fall on record, sinking to four-year closing lows while trading
in Brazil halted after a 15 percent drop in its benchmark
index. [ID:nL6511744]
                                
 The drop in prices has caused some concern among OPEC
members.
                                
 "Definitely there is worry. When the prices are so
volatile, like rising to $140 and then dropping to below $90,
it worries everybody," said Iraq's Oil Minister Hussain
al-Shahristani. [ID:nL6483619]
                                
 Iran said $100 a barrel was too low and urged members to
respect their output targets to prevent oversupply from
worsening. [ID:nL4649845]
                                
 OPEC President Chakib Khelil said OPEC would seek to
balance the market when it meets in December.[ID:nL570862]
                                
 (Reporting by Matthew Robinson, Gene Ramos and Robert
Gibbons in New York; Jane Merriman and Joe Brock in London and
Jonathan Leff in Singapore; Editing by Marguerita Choy)