Oil tumbled below $100 a barrel to a six-month low on early signs that Hurricane Ike may have spared key Gulf Coast infrastructure.

The upside for oil, which has lost about 32 percent since its peak of over $147 in mid-July, was also limited as financial woes mounted after talks to rescue Lehman Brothers faltered and Bank of America Corp agreed to buy Merrill Lynch & Co Inc, which has also been struggling with mortgage-related debt.

US light crude for October delivery fell $1.52 or 1.5 percent to $99.66 a barrel by 0223 GMT. London Brent crude fell $1.23 to $96.35.

US prices dived as low as $98.46 -- the lowest since Feb 26 -- on Sunday, when the New York Mercantile Exchange held a special trading session due to Hurricane Ike.

"Losses have narrowed because there is still a large amount of Gulf production offline and refineries are still under threat. The market is waiting for more news on the extent of the damage before making their next move," said Gerard Burg, a commodities analyst at the National Australian Bank in Melbourne.

"But the market will also be looking at the failure of talks to rescue Lehman as that might darken economic outlook and weaken energy consumption."    

If Lehman and Merrill disappear or get taken over, then three of the top five US investment banks would have dissolved or been bought inside six months. Bear Stearns was acquired in a fire sale by JPMorgan in March.

Oil has fallen steadily since mid-July's peak of over $147 a barrel amid mounting evidence that high energy costs and a weakening economy are cutting deeply into fuel consumption. - Reuters