VIENNA -- Oil prices were down Wednesday after a rate cut by the world's major central banks.

While still down from Tuesday's closing, prices rose after the US Federal Reserve and other global central banking authourities cut their interest rates by half a percentage point, in the Fed's case to 1.5 percent.

In Europe, which was also affected by the financial crisis, the Bank of England cut its rate by half a point to 4.5 percent, while the European Central Bank cut its rate to 3.75 percent. Other central banks taking part include the banks of Canada, Sweden, and Switzerland.

Light, sweet crude for November delivery was down USD 1.44 (EUR 1.05) to USD 88.64 a barrel in electronic trading on the New York Mercantile Exchange by Tuesday afternoon in Europe. The price overnight rose USD 2.25 to settle at USD 90.06 but opened lower Wednesday on investor concerns that the US credit crisis was affecting the globe — and would hurt crude demand.

A USD 700 billion US financial bailout plan approved last Friday failed to soothe investors worried about a worsening economic problem. The Dow Jones industrial average fell more than 500 points Tuesday, to its lowest point since 2003.

The crisis spread to Europe as well. The British government announced plans Wednesday to partially nationalise its major banks. The Treasury said eight banks signed up for the “recapitalisation” plan that offers up to GBP 50 billion (EUR 63 billion) in preferred stocks.

The Reserve Bank of Australia surprised markets Tuesday when it cut its rate a full percentage point to 6 percent, its biggest cut since 1992.

Asian shares were hit hard Wednesday, with Japan's Nikkei stock average falling nearly 10 percent to its lowest point since 2003. Hong Kong's market plunged 8 percent.

"We've got major issues in every corner of the planet", said Peter McGuire, managing director at investment firm Commodity Warrants Australia in Sydney. "The world economy is like a house that's been ravaged by termites".

The Organisation of Petroleum Exporting Countries may cut production if prices fall further, but the cuts would be limited by concern higher energy costs would worsen the economic slowdown, McGuire said.

"OPEC can only do so much", McGuire said. "We may see interest rates cuts and increased government spending as a way out".

[AP / Expatica]