OPEC Cuts Fail to Boost Oil Prices

While production cuts will help drain a massive global surplus of crude, "if they cut too much, you'll start to see all sorts of inflation in oil prices and that's not good," said Gene McGillian, analyst with Tradition Energy.

Oil prices recently have been following equity markets as an indicator of confidence in the global economy, and investors seemed relieved by a report by the Wall Street Journal late Sunday saying Citigroup is in negotiations to let the U.S. government increase its stake in the troubled lender to as much as 40%.

However, analysts believe the uptick in confidence may be only temporary, as the backdrop of economic and corporate data remains weak and suggests oil demand may fall further.

Dismal jobs, industrial production and corporate earnings reports so far this year have heightened investor fears that the worst U.S. recession in decades is deepening.

The Campbell Soup Co. reported Monday that its second-quarter profit dropped 15%. The company said its profits were hurt by currency exchange rates and its margins were squeezed further by higher advertising and promotional spending.

"The macroeconomics news has been nothing but gloomy, especially on jobs, which really affects the real economy," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "Demand looks gloomy in the near term, so there continues to be a lot of downward pressure on oil."

This downward pressure is not likely to recover soon, according to some analysts.

"Global economic statistics and lackluster performance in global shares suggest the odds are lengthening we will see a global economic recovery in the second half of this year," said analyst Stephen Schork.

In other Nymex trading, gasoline futures fell less than a penny a gallon to $1.07 and heating oil rose less than a penny to $1.21 a gallon. Natural gas for March delivery rose 6 cents to $4.066 per 1,000 cubic feet.