Monday February 2, 09:12 PM
Oil prices hover around 40 dollars in New York
NEW YORK (AFP) - Oil prices fell briefly below 40 dollars in New York on Monday as weak global energy demand overshadowed snowstorms in Europe, simmering tensions in the Middle East and strike threats in the United States.
New York's main contract, light sweet crude for March, sank as low as 39.83 dollars per barrel before ending at 40.08 dollars, down 1.60 dollars from Friday's close.
Brent North Sea crude for delivery in March slid 2.06 dollars to 43.82 dollars on London's InterContinental Exchange.
Experts expected bearish market sentiment for a while despite production cuts by the OPEC cartel.
"It doesn't change. Everyday, it's a contest between OPEC trimming production and the economy loosing jobs. Today the economy won," said Adam Sieminski of Deutsche bank (Xetra: DBK.DE - news) .
"I think we're going to see a market like this for the next six months, until there is a very clear sign that the economy is bottoming, even with OPEC discipline," he said. "Psychologically the depression is weighing on the market."
Gloomy economic news "more than offset the impact of cold weather and renewed tension in the Middle East," said Calyon analyst Christophe Barret.
Snow storms brought travel chaos to western Europe on Monday, closing London-Heathrow airport after one jet slid off a taxiway and at least five people were killed in storm incidents.
Cold weather conditions traditionally boost oil prices as countries ramp up their demand for heating fuel.
However, the worldwide global economic slowdown has cast a long shadow over the market, slashing oil prices in recent months as recession-hit nations curtail their energy demand.
Oil had edged higher on Friday following a milder-than-expected fourth quarter contraction in the United States and fears of a strike crippling American refineries and pipelines.
Government data last week showed the economy in the United States -- the world's biggest energy consumer -- had shrunk by 3.8 percent in the fourth quarter of 2008, the worst performance in 26 years.
US oil industry representative and union negotiators entered extended talks on a new contract as the threat of a nationwide strike loomed.
The contract covering 24,000 employees at the oil majors and independent refiners expired Sunday.
Shell (LSE: RDSB.L - news) , representing the oil industry, and the United Steelworkers union agreed to extend the talks on a rolling 24-hour basis.
"Yet a settlement may drive oil and products lower after the dismal GDP and the lack of confidence in the stimulus talk coming out of Washington," said Phil Flynn, an analyst at Alaron Trading.
"With a stronger dollar and an averted strike, oil is going to have a hard time," he said.
However in Britain on Monday, wildcat strikes against foreign workers resumed at energy plants across Britain, fueled by fears of rising job cuts amid the global slowdown.
At least 600 contractors at the Sellafield and Heysham nuclear facilities in northwest England were among the latest wave of workers to join protests which first flared last week. Managers insist safety and production will not be hit.
They and others came out against the use of around 100 Italian and Portuguese contractors on a building project at the Lindsey oil refinery, owned by French oil giant Total, at Immingham in eastern England.
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