Oil futures tumbled 6% below $40 a barrel Monday, as the global economic downturn continued to fuel worries about a sharp slowdown in energy demand.
Crude oil for February delivery fell $2.52, or 6%, to $38.28 a barrel in electronic trading on Globex.
"The demand destruction amid continued weakness in the global economy coupled with excess supply in the market at the moment is likely to continue to dominate sentiment," said Nimit Khamar, an analyst at Sucden Financial Research.
"Crude oil prices are still susceptible to further declines, even a test toward recent lows before some base is established," he wrote in a research note.
On Friday, oil futures fell 2% to end the week with their biggest weekly loss in five weeks, after a government report showed that the U.S., the world's biggest oil consumer, lost the most jobs in 2008 since World War II.
The Labor Department reported Friday that nearly 2.6 million U.S. jobs were lost in 2008, the biggest job loss since 1945. Oil ended the week down 12%, the biggest percentage decline since the week ended Dec. 5, when it tumbled 25% in five sessions.
Energy traders also kept an eye on the military conflict between Israel and militant group Hamas in the Gaza Strip.
Israel called in its reservists to join the conflict against Hamas, while the group rejected an Egyptian proposal for a cease-fire, media reports on Monday said. On the diplomatic front, France's foreign minister, Bernard Kouchner, said that any cease-fire the two sides reach should be overseen by European and other monitors, reports say. Read more.
Also on Globex, February reformulated gasoline fell 4 cents, or 4%, to $1.07 a gallon and February heating oil dropped 3 cents, or 2%, to $1.46 a gallon.
February natural gas futures fell 11 cents, or 2%, to $5.40 per million British thermal units.
