LONDON, Dec 23: World oil prices fell on Tuesday below $40 a barrel in thin pre-Christmas trade, as traders eyed weak energy demand arising from a global economic downturn.

Light sweet crude for delivery in February delivery shed $1.58 to $38.33 a barrel on the New York Mercantile Exchange (NYMEX).

The price of Brent North Sea crude for February sank $1.75 to $39.70 per barrel on London’s InterContinental Exchange (ICE).

Both contracts had fallen by about $2.5 on Monday as the market was also plagued by weakening world demand for energy.

Losses accelerated on Tuesday after confirmation that the American economy -- the world’s biggest crude oil consumer -- contracted by 0.5 per cent in the third quarter of the year.

The abrupt contraction of gross domestic product (GDP) in the world’s largest economy was seen as marking the start of a steep downturn for the United States after GDP growth of 2.8 per cent in the second quarter.

“Crude oil markets were lower in generally thin conditions amid continuing news of lower global demand,” said analyst Nimit Khamar at the Sucden brokerage in London.

“Given thin conditions and continuing concerns about the global economy, markets may drift lower until the end of this year but stay broadly within a range centred near $40 a barrel.”

New York crude for January delivery ended Friday after tumbling close to a five-year low of $32.40 per barrel -- which was last seen on February 9, 2004 -- as investors raced to sell before the contract’s expiry.

Crude futures have collapsed by as much as 78 per cent since striking record highs above $147 per barrel in July, as a sharp global economic slowdown saps the world’s demand for energy.

“Oil continues to tumble, as concerns of a worldwide slowdown continues to hamper demand,” added BetOnMarkets analyst Dave Evans.

“Japan, the world’s third biggest importer of oil, said that crude imports fell by more then 17 per cent last month.”

Analysts noted that the recent rise in oil stocks in the United States caused New York prices to fall below their Brent counterpart in London, which is unusual.

Oil reserves in Cushing, Oklahoma, where light, sweet crude oil is stored, are at maximum capacity.

Traders will look Wednesday to a key weekly US energy report published by the US government’s Department of Energy. —AFP