Oil fell more than $2 towards $38 a barrel today, dragged down by growing evidence that recession is reducing global energy consumption.
The decline came as Russia and Ukraine signed a deal to help secure the resumption of Russian gas supplies to Europe, cut off for nearly a week in freezing temperatures.
US light crude for February delivery fell more than 6 percent to a low of $38.12, down $2.71, before recovering slightly. By 2.20pm, the contract was down $2.55 at $38.28. London Brent crude was down $1.77 at $42.65.
US jobless data on Friday set the tone for the market.
A US government report showed employers slashed jobs by 524,000 in December, driving the national unemployment rate to its highest level in almost 16 years.
"The US unemployment numbers on Friday started the latest leg downwards. We have had a string of bad news, with companies and economies all reporting negative data. It is almost relentlessly bad," said Rob Laughlin, senior oil analyst at MF Globalin London.
Oil prices fell 54 percent last year and have shed more than $100 from a record peak of above $147 a barrel last July as the global economic downturn hits demand for fuel.
The world's top oil exporter, Saudi Arabia, plans to cut output by up to 300,000 barrels per day (bpd) below its agreed OPEC target, a proactive step to prop up a collapsing market, industry sources said yesterday.
Riyadh has already lowered supply this month to 8 million bpd, meeting its target under OPEC's pact to reduce overall supplies by a record amount from January 1st.
Reuters