NEW YORK (Bloomberg) — Crude oil may dip below $25 a barrel next year if the recession that's slashing fuel demand around the world spreads to China, Merrill Lynch & Co. said.

Global oil demand will contract in 2009 as economic growth slows to its weakest since 1982, Merrill Commodity Strategist Francisco Blanch said in a report today. In October, when oil was around $100 a barrel, the bank predicted that prices may slide to $50.

"A temporary drop below $25 a barrel is possible if the global recession extends to China and significant non-Opec cuts are required," Blanch said. "In the short-run, global oil demand growth will likely take a further beating as banks continue to cut credit to consumers and corporations."

Crude hasn't fallen below $25 a barrel on the New York Mercantile Exchange since November 2002.

Global oil demand has slumped as the US, Europe and Japan face simultaneous recessions for the first time since World War II.

Merrill reiterated a November 26 forecast that oil futures traded in New York will average $50 a barrel next year. Prices "could find a trough" at the end of the first quarter and undergo a "modest recovery" in the second half as economies strengthen, according to yesterday's report.

"We expect strong cooperation to emerge" among members of the Opec as prices fall below $50, Blanch said. Opec, producer of more than 40 percent of the world's crude, was still pumping about one million barrels a day more than its official target of 27.3 million barrels a day last month.