Oil prices fell below US$40 a barrel yesterday in Asia as investors looked to key US corporate results this week for indications of the health of the world’s largest economy and demand for crude.
Light, sweet crude for delivery next month was down US$0.98 to US$39.85 a barrel by mid-afternoon in Singapore in electronic trading on the New York Mercantile Exchange. The contract on Friday fell US$0.87 to settle at US$40.83.
Steel producer Alcoa, chip maker Intel and biotech company Genentech are expected to report fourth-quarter results this week, giving investors a gauge of how deep the recession may be.
“Given that we’re likely to see quite a few rather poor fourth-quarter earnings reports, downward pressure will continue to be exerted on oil,” said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. “Worries about the macroeconomic outlook will continue to constrain oil.”
Oil prices fell 17 percent last week, weighed down by fears that rising US unemployment will undermine crude demand.
The US Labor Department said on Friday that employers slashed 524,000 jobs last month and 2.6 million jobs for all of last year. The unemployment rate jumped to 7.2 percent, the highest since 1993.
Crude prices have fallen despite a three-week conflict between Israel and Hamas in Gaza, a dispute between Russia and Ukraine that has shut off or disrupted natural gas supplies to more than a dozen European nations and diminished crude exports from OPEC, which accounts for about 40 percent of global supply.
“We have these other factors that will support oil,” Shum said. “Most likely, we won’t see a big downward spiral despite the poor earnings reports.”
Prices of futures contracts for later this year suggest investors expect oil to recover.
The March contract trades near US$46 a barrel.