Crude oil prices slumped on Tuesday after Greece called for a referendum on its EU bailout deal, raising tensions in the eurozone debt crisis which threatens to hit energy demand, traders said.

The market was also rocked by weak manufacturing data from top energy consuming nation China.

New York's main oil contract, light sweet crude for delivery in December, dived $2.36 cents to $90.83 a barrel.

Brent North Sea crude for December sank $1.84 to $107.72 a barrel in London midday trade.

Oil suffered heavy falls, in line with plunging world stock markets and a tumbling euro, as dealers fretted over a potential Greek default that risks sparking debt contagion and fresh recession.

Greek Prime Minister George Papandreou announced on Monday a confidence vote and a referendum on last week's EU debt deal, taking a political gamble in an attempt to silence growing opposition to his policies.

The news sent shockwaves through markets because an adverse result in either process would scupper the EU deal, which is designed to cut Greece's debt load of over 350 billion euros ($495 billion) by about 100 billion euros.

"The need for a vote of confidence for the proposed eurozone solution in Greece is ... very unnerving for investors and even more so the call for a referendum in January," said oil analyst Bjarne Schieldrop at Swedish bank SEB.

"Further eurozone progress could be put on hold awaiting the Greek referendum," he told AFP. The confidence vote was expected on Friday.

Official data meanwhile showed that growth in China's manufacturing activity slowed in October following a sharp fall in export orders, as US and European economic woes hit demand for Chinese goods.

The official purchasing managers' index (PMI) -- based on a survey of 820 manufacturers -- dropped to 50.4 in October from 51.2 in September, the China Federation of Logistics and Purchasing said in a statement.

A reading above 50 indicates the sector is expanding, while a reading below 50 suggests a contraction.

Oil prices were also falling after US brokerage firm MF Global filed for bankruptcy overnight, following a string of losses from its European public debt holdings.

MF Global's filing made it the first major US casualty of the eurozone debt crisis, and sparked memories of the collapse of US investment giant Lehman Brothers in late 2008 at the height of the notorious global financial crisis.

In a further gloomy development on Tuesday, the yield on Italian 10-year government bonds rose to about 6.2 percent, pressured by concerns that Italy could be dragged further into the region's worsening debt crisis.

"Today's bearish action is all about the eurozone, but helped by MF Global bankruptcy giving flashbacks to Lehman Brothers, even though MF is of much smaller scope," added Schieldrop.

"Rising Italian yields are the clear indication that the latest package to solve the eurozone troubles is not adequate in the eyes of the investors."

Leaders of the Group of 20 developed and developing nations will meet this week in French city of Cannes, with the debt drama expected to top the agenda.

Oil had rallied last week after a breakthrough eurozone rescue deal was clinched in Brussels. But investor euphoria has since waned as governments grapple with the details of implementing the plan.