Oil extended losses below $34 a barrel today, after Russia and Ukraine signed a gas deal that would help secure supplies to Europe, while no improvement was in sight for oil demand.
Economic gloom deepened after the Royal Bank of Scotland posted the biggest loss in the UK's corporate history, with stock markets in Asia following European counterparts lower and the Japan Nikkei benchmark closing down 2.31 per cent.
The dollar rose to a six-week high against the euro on the news, making US-denominated commodities less attractive to investors.
The United State was closed yesterday for the Martin Luther King holiday, and trade was thin, especially on the front-month February contract, due to expire on Tuesday.
US light crude for February delivery fell to $33.90 a barrel by 6.49am, down $2.61 from Friday's settlement and near yesterday's low of $33.89, when no official settlement was issued due to the holiday.
The March contract, which takes over as front-month on Wednesday, was down $2.32 to $40.25, and more than $6.00 a barrel above the February contract due to brimming crude stocks at Cushing, Oklahoma, the delivery point for NYMEX contracts.
London Brent crude fell 40 cents to $44.10 a barrel, after closing $2.07 lower today.
“Seasonal cold weather continues to be the only supportive factor on the demand side,” said French bank Societe Generale in an overnight report.
Oil prices have fallen by more than three quarters since record highs above $147 a barrel hit last July, as a financial turmoil has evolved into a global economic crisis and weakened oil demand.
Two recent supportive factors have been removed, after Russia and Ukraine signed a 10-year gas deal clearing the way for the resumption of supplies to a freezing Europe, and implementation of a ceasefire between Israel and Hamas in Gaza eased supply worries.
China, once a driver of the surge in oil prices, is expected to release this week fourth-quarter GDP data that economists say will show a 7 per cent growth, much higher than in the developed world, but the slowest pace of expansion for world's third-biggest economy in nearly a decade.