By Christopher Johnson LONDON (Reuters) - Oil prices tumbled on Tuesday as a slide in global stock markets refocused attention on the prospect of widespread recession, which is likely to cut deep into oil demand in many developed economies. U.S. light, sweet crude for December delivery fell $2.74, or 4.4 percent, to $59.66 a barrel by 7:38 a.m. EST. London ICE Brent crude fell $2.56, or 4.35 percent, to $56.52. "The oil market is coming down into line with demand expectations," said Simon Wardell, oil analyst at Global Insight in London. "There's more downside weakness here than upside strength. We are expecting prices to go lower before they go higher with U.S. crude hitting $50 before its reaches $65 again." Economists are gradually readjusting their expectations for oil demand in the light of the accelerating slowdown in the United States and Europe and some say a contraction in worldwide oil demand is possible next year. Many analysts are expecting a big drop in consumption in the developed economies next year and most suggest that a further rise in demand in developing economies just about offsets that fall in demand. But some economists are now talking about a fall in global oil demand in 2009. "If we start seeing that, we really are dealing with a major surplus in supply and oil prices will come under heavy pressure," said Wardell. INVENTORIES The recent fall in prices and signs of falling demand are encouraging oil consumers and refiners to keep their stocks low and even get rid of inventory, keeping prices in contango, with oil to be delivered soon much lower than forward futures prices. Traders said the slide in oil prices began in very early trading as falls in U.S., Asian and then European stock markets drew investors' attention away from China's $600 billion economic aid package. "I think people got a little carried away yesterday with the Chinese fiscal package and the impact it may have on oil prices and after a morning rally reality set in," said Robert Laughlin at MF Global in a research note on Tuesday. World stock markets slumped with European stocks tracking losses in the U.S. and Asia .EU On Monday, oil prices closed 2 percent higher, recovering from a mid-session fall of $59.10 a barrel, the lowest in nearly 20 months. Oil has shed 60 percent of its value since hitting a record high $147 in July. In the United States, the latest weekly inventory data is likely to show rising stockpiles as demand remains weak, traders and analysts said. Crude oil stocks were expected to have risen by 800,000 million barrels last week, while distillate stocks should rise by 500,000 million barrels and gasoline by 800,000 million-barrels, a preliminary poll of analysts showed. The data will be released on Thursday this week, a day later than usual due to Tuesday's national holiday. (Additional reporting by James Topham and Jonathan Leff; Editing by James Jukwey)

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