Oil eased below $39 a barrel today, heading for a fall of more than 60 percent in 2008 as the global economic slowdown bit deep into energy demand and the latest U.S. inventory data showed further rises in fuel stocks.
Prices have plunged since hitting an all-time high above $147 in July as a credit crisis has dragged the industrialized world into recession and depressed demand for oil.
U.S. crude oil futures for February fell 20 cents to $38.83 per barrel by 1601 GMT, up from this year's low of $32.40 hit on December 19, but still more than 60 percent below last year's closing level of $95.98.
London Brent was down a cent at $40.14.
Weekly U.S. inventory data on Wednesday showed a 500,000 barrel rise in crude stocks, compared with forecasts for a 1.5 million barrel decrease.
Inventories of refined products also rose, though less than analysts had expected. Gasoline stockpiles increased by 800,000 barrels, less than forecasts for a 1.5 million barrel build, while distillates rose by 700,000 barrels, below expectations for a 1.1 million barrel increase.
Demand for both gasoline and distillates, which include heating oil, was lower than the same time a year ago, extending the trend for reduced consumption.
Analysts said the overriding concern was still the economy and predicted prices would remain under pressure in the near term.
"Overall, today's numbers will be overshadowed by ongoing economic concerns and the direction of global equity markets as traders try to ascertain if the worst is over in regards to the global slowdown," said Chris Jarvis of Caprock Risk Management.
Analysts forecast an average of $49 a barrel for U.S. crude in the first quarter, and an average of $58.48 for next year, down $14 from their previous forecasts, the latest Reuters poll showed.
Faced with slumping demand and prices, the Organization of the Petroleum Exporting Countries said earlier this month it was cutting output by 2.2 million barrels per day (bpd), its deepest reduction ever.
Evidence is mounting the group is complying with its goal to reduce production, led by top exporter Saudi Arabia.
Market sources said on Tuesday the kingdom's supplies to long-term buyers in February could imply production of even less than its new OPEC production target.