Oil slides below $41, fuel demand shrinks

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STRIKE THREAT: Possible refinery strike action in the UK, US buoyed the oil price on Monday. (Getty Images)

Oil fell below $41 a barrel on Monday as a deepening US recession shrank demand in the world's top fuel burner and evidence mounted of a global downturn.

Growing concern over poor economic data and falling corporate profits took a toll on equity markets, which hit a one-week low and sent the euro to a two-month trough against the dollar.

The price of crude has plunged by more than $100 from its peak near $150 last July as energy use slows worldwide.

US light crude for March delivery fell $1.26 to $40.42 a barrel by 04.41pm UAE time, after gaining as much as 63 cents in early trade.

London Brent crude shed $1.11 to $44.77 a barrel.

"Demand concerns are still weighing on prices, with the macroeconomic outlook still pretty bleak," said Andrey Kryuchenkov, Vice President of Commodities at VTB Capital in London.

"But we'd probably need to see a big crude stock-build again in the US this week to move us below $40."

A report from the US Energy Information Administration on Friday showed US oil demand in November was 305,000 barrels per day (bpd) less than previously estimated and was down 1.577 million bpd from a year earlier.

Investors were awaiting Monday's US economic indicators for a fresh assessment of the world's largest economy.

Data due to be released include personal income and consumption, construction spending for December and the Institute for Supply Management's January index of manufacturing activity.

Grim news was already out in Europe, where Euro zone manufacturing shrank and factory prices tumbled at their fastest rate in at least six years.

Sales of new cars dropped further in Spain and France.

Bleak economic data also emerged from South Korea, which showed January exports contracting at a record pace.

Some support for the oil price on Monday was offered by refinery strikes on both sides of the Atlantic.

United Steelworkers negotiators and oil company representatives returned to the bargaining table on Sunday, a day after telling thousands of US refinery and chemical plant workers to stay on the job as they try to hammer out a new national contract.

In Britain, several hundred workers at the Sellafield nuclear plant walked out on Monday, joining wildcat strikes over the use of foreign workers that has mostly affected oil and power plants.

Signs from OPEC that it might remove more supply on top of record output curbs and an abrupt end to a ceasefire in Nigeria's oil-rich Niger delta also supported prices.

OPEC Secretary General Abdullah Al Badri told Reuters on Friday the producer group was willing to cut output further at its meeting in March, adding to agreed cuts of 4.2 million bpd since September to prop up prices. (Reuters)

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