(AP) –Oil prices fell below $37 a barrel Tuesday on expectations crude demand will weaken amid a severe global economic slowdown.
By midday in Europe, light, sweet crude for February delivery was down 91 cents at $36.68 a barrel in electronic trading on the New York Mercantile Exchange.
In London, February Brent crude fell 19 cents to $42.72 a barrel on the ICE Futures exchange.
“After some transient end-of-year strength, it would appear that crude oil bears have once again found their groove,” said the Schork Report, edited by oil trader and analyst Stephen Schork.
Crude prices have fallen more than 25 percent since reaching just above $50 a barrel last week as traders returned from the holiday break to find evidence of falling manufacturing and consumer spending across the globe.
The February contract fell 8 percent on Monday, or $3.24, to settle at $37.59 after Alcoa Inc., the world’s third-largest aluminum company, reported a quarterly loss of $1.19 billion.
Alcoa, the first component of the Dow Jones industrial average to post results, said last week it plans to lay off about 13 percent of its global work force by the end of 2009 amid sinking prices and demand for the metal.
The Dow fell 1.5 percent Monday and has dropped 3.5 percent this year.
“The negative sentiment we’re seeing reflects the broad international macroeconomic outlook, which is considerably weaker, and what that means for energy consumption,” said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney.
Prices have fallen despite continued fighting between Israel and Hamas in Gaza. After initially spurring a jump in oil prices, the Gaza conflict has been largely ignored by traders because it hasn’t affected major supplies and no oil-rich Middle East neighbors have become directly involved.
“The impact on oil supply is obviously limited,” Moore said.
Prices of futures contracts for later this year are higher than the February contract on investor expectations that announced production cuts of 4.2 million barrels a day since September by the Organization of Petroleum Exporting Countries will begin to reduce global supply.
The June contract trades at $50.40 a barrel.
“There’s some wariness that the OPEC actions may cause markets to tighten up,” said Moore, who expects oil to average $55 a barrel this year.
“OPEC is starting to get concerned — again — and the ministers are determined to generate a rally,” said a report from U.S. energy consultancy Cameron Hanover, which urged the U.S. government to increase the level of its Strategic Petroleum Reserves.
“It would help raise prices to a level that could get OPEC feeling less vulnerable (and less likely to cut output again) at the same time that it would save the surplus for later,” Cameron Hanover said.
Investors are also looking for signs that demand from emerging markets, which helped drive oil’s rise to $147.27 a barrel in July, will rebound.
“Growth concerns will dominate for the next few months,” said Robert Prior-Wandesforde, co-head of Asian economic research at HSBC in Singapore. “Commodity prices will start to improve as sentiment about China and India starts to turn later this year.”
In other Nymex trading, gasoline futures rose 0.92 cent to $1.0933 a gallon. Heating oil advanced 0.99 cent to $1.4823 a gallon while natural gas for February delivery slid 3.9 cents to $5.503 per 1,000 cubic feet.