Oil prices extended declines today, sliding towards $38 on growing economic worries after US stocks slumped to a 12-year low at the previous day's close.
Wall Street shares tumbled on Monday as optimism over reports that the US government could take a bigger stake in Citigroup gave way to fresh questions about whether Washington is doing enough to stabilise the ailing banking and credit sectors.
US oil crude for April delivery fell 34 cents to $38.10 by 6.13am, after earlier hitting an intraday low of $37.65, while London Brent crude lost 28 cents to $40.71.
"The global financial crisis is still at hand, making oil prices drift lower along with other commodities," said Victor Say, an analyst at Informa Global Markets.
"The economic data is not at all rosy, and if nothing comes out of the U.S. on plans to rescue the banks in the next couple of days, oil prices will go down, probably even below $36."
Asian stocks fell today, with Japan's Nikkei down 1.5 per cent and South Korean shares falling 3.2 per cent. Global energy consumption has collapsed as the financial
crisis throws a raft of major economies into a recession, prompting oil prices to tumble nearly $110 since peaking in July.
Oil's decline today was curbed by a report that OPEC's supply was likely to fall in February as members enforced a deal to cut output, increasing the group's scope to slow production further at a March 15th meeting, traders said.
The 11 members with quotas, all except Iraq, had reduced output by 3.8 per cent to 25.3 million barrels per day in February, according to industry consultant PetroLogistics Ltd.
Iran's local media reported that its OPEC governor had said the producer might decide to cut output again next month if crude prices fell further. Along with Iran, Venezuela and Iraq said last week that OPEC was prepared to cut production again.
Investors are eyeing US oil inventory data, which is likely to show a 1.9 million barrel increase in US crude stocks last week, according to a preliminary Reuters poll.
Reuters