Oil futures dropped 4% Tuesday, as falling stocks and concerns about the global economy weighed on investor sentiment.
Crude oil for March delivery fell $1.49, or 4%, to $36 a barrel in electronic trading on Globex.
The March contract, which will expire at the end of trading on Friday, earlier hit an intraday low of $35.96.
April crude will soon become the new front-month contract and which registered more volume. The April contract fell $1.95, or 4.7%, to $40.07 a barrel.
"Oil markets are likely to remain vulnerable to further losses, with risk aversion on the rise and as bulls lose hope for a swift recovery in global economies following an array of negative economic data recently," said Nimit Khamar, an analyst at Sucden Financial Research.
Grim economic data from Japan reinforced worries about the global economy.
Japan's economy slumped at a larger-than-expected 3.3% in the October-December period from the previous quarter as the impact of the global financial crisis hit its exports hard, according to data released Monday. The steep fall reportedly represents the biggest drop since 1974.
On Wall Street, U.S. stock futures dropped Tuesday after a three-day break, as concerns over possible automaker bankruptcy and contagion effects from Eastern Europe's meltdown weighed on sentiment. See Indications.
"Whether the December low of $32.40 holds remains to be seen, but given that OPEC is working hard to institute cutbacks, while at the same time signaling that another cut in March could be imminent, we suspect that prices should sustain themselves above the $30 mark at least for a little while longer," said Edward Meir, an analyst at MF Global, in a research note.
In an attempt to stem the slide in oil prices, the Organization of Petroleum Exporting Countries has agreed to cut its production by 4.2 million barrels a day since September, or equivalent to about 5% of the world's oil demand.
There have also been growing indications in recent days that OPEC may choose to cut output further at its upcoming meeting in Vienna, Austria, on March 15.
Also on Globex Tuesday, March reformulated gasoline fell 3 cents, or 2.5%, to $1.18 a gallon and March heating oil dropped 6 cents, or 5%, to $1.24 a gallon.
March natural gas futures fell 18 cents, or 4%, to $4.27 per million British thermal units.
