Oil Falls to $37/Barrel on Weaker Demand

By Pablo Gorondi

Oil prices fell 59 cents to $37 a barrel Tuesday in electronic trading on the New York Mercantile Exchange on expectations crude demand will weaken amid a severe global economic slowdown.

"After some transient end-of-year strength, it would appear that crude oil bears have once again found their groove," said the Schork Report, edited by oil trader and analyst Stephen Schork.

Crude prices have fallen more than 25% since reaching just above $50 a barrel last week as traders returned from the holiday break to find evidence of falling manufacturing and consumer spending across the globe.

The February contract fell 8% on Monday, or $3.24, to settle at $37.59 after Alcoa(AA Quote), the world's third-largest aluminum company, reported a quarterly loss of $1.2 billion.

Alcoa, the first component of the Dow Jones Industrial Average to post results, said last week it plans to lay off about 13% of its global work force by the end of 2009 amid sinking prices and demand for the metal.

Prices have fallen despite continued fighting between Israel and Hamas in Gaza. After initially spurring a jump in oil prices, the Gaza conflict has been largely ignored by traders because it hasn't affected major supplies and no oil-rich Middle East neighbors have become directly involved.

Prices of futures contracts for later this year are higher than the February contract on investor expectations that announced production cuts of 4.2 million barrels a day since September by the Organization of Petroleum Exporting Countries will begin to reduce global supply.