Monday January 12, 05:40 PM
Oil prices slide below 40 dollars
LONDON (AFP) - Oil prices slid under 40 dollars Monday on concerns that a deepening global economic downturn could spark a slump in demand for energy, analysts said.
The market was also weighed down by news of a possible resolution to the ongoing Russia-Ukraine gas supply crisis, they added.
Traders also tracked developments in the Middle East, where Israeli infantry units clashed with Hamas fighters across Gaza even as talks in Egypt tried to end the 17-day-old war.
New York's main contract, light sweet crude for delivery in February, slumped 2.95 dollars to 37.88 dollars per barrel on the New York Mercantile Exchange (NYMEX).
Brent North Sea crude for February shed 1.97 dollars to 42.45 dollars on London's InterContinental Exchange.
The market had tumbled last week after a brief bounce above 50 dollars on the back of jitters over the Russia-Ukraine crisis and ongoing unrest in Gaza, whose neighbours are key oil-producing nations.
On Monday, the European Union secured Russian assurances that gas shipments to Europe would resume shortly after Moscow and Kiev re-signed a deal to monitor the flow to EU markets.
With many EU countries suffering cuts in Russian gas, hopes were high that the latest development in the dispute between Russia and Ukraine would restore supplies crucial for heating European homes and factories by Tuesday morning (NASDAQ: TUES - news) .
"We cannot accept further delays, further excuses that keep European citizens in the cold," European Commission chief Jose Manuel Barroso told reporters.
"This crisis between Russia and Ukraine has gone on far too long."
Russia had accused Ukraine of illegally siphoning off gas destined for Europe after Moscow cut off gas supplies to Ukraine's domestic market on New Year's Day -- a charge vehemently denied by Ukrainian officials.
Meanwhile, Israeli troops battled Hamas militants across the Gaza Strip, with the most violent clashes reported in the north of the Palestinian enclave, battered by a war that has claimed some 900 lives.
There are worries that the violence could hamper oil exports from neighbouring producers.
Oil prices dived by 16 percent last week on concerns that a US stockpile buildup reflected how the global economic slump is further dampening demand, traders said.
"Downward pressure stemmed from continued concerns over weakening demand and a significant increase in US inventories," said analysts at energy consultancy John Hall Associates.
"Concerns over weakening demand should predominate this week, leading to expectations that prices are likely to average between 37-42 dollars a barrel.
"In the short term, the focus is likely to return to falling demand as a consequence of the deepening global recession," added the consultancy in a research note to clients.
Sentiment took a big hit after a US jobs data report released Friday showed unemployment jumped to a 16-year high of 7.2 percent, with 524,000 jobs lost in December, capping the worst annual performance since 1945.
The acceleration of job losses suggested a vicious downward cycle for the world's biggest economy, analysts said.
The US is the world's leading energy consuming nation and analysts fear oil demand could be affected badly should the American economy remain stuck in a recession.
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