Oil was little changed yesterday, trading close to six-week lows amid concerns about global growth and sluggish oil demand.
Fresh economic data out of China, the world's second-largest energy consumer, heightened concerns that Beijing would further tighten monetary policy.
An official purchasing managers index remained firmly in expansionary territory, while a companion poll by HSBC scaled an all-time high – with both reports showing evidence of a further increase in cost pressures.
US crude for March delivery slid four cents to $72.85 a barrel by 0818 GMT. Prices touched $72.43 on January 29, the lowest intraday price since December 21. London Brent crude fell two cents to $71.44.
Prices rose briefly following a fire at a crude oil storage tank in Kuwait. State-run Kuwait Oil Co was fighting the fire and there was no impact on production, state news agency Kuna said.
Oil prices ended January down more than eight per cent, pressured by data showing tepid energy demand in the United States, worries about fiscal turmoil in smaller euro zone countries and a stronger US dollar.
"The cold weather premium is coming off and investors have to consider the pace of global economic recovery, actual oil demand and a strengthening US dollar," said Benson Wang, an oil trader at Commodity Broking Services in Sydney.
"Looking at how crude oil prices have collapsed in the last 1-2 hours of trading in the past few sessions, I think it shows a trend whereby investors are trying to get out of their long positions."
Money managers cut their net long crude oil futures position on the New York Mercantile Exchange in the week through January 26, the Commodity Futures Trading Commission said on Friday.
While the economic data from China showed a strong manufacturing sector, Beijing's moves last month to rein in rapid growth and curb inflationary pressures have sparked fears that such measures could impede a still-weak global economic recovery and curb Chinese demand for energy and commodities.
Adding to the gloom, the White House will predict a $1.6 trillion (Dh5.87trn) US budget deficit in the 2010 fiscal year, a fresh record and the biggest since the Second World War as a share of the economy, a congressional source told Reuters.
Markets are also bracing for other economic news this week, with a number of major central bank meetings across the world and a raft of economic reports out of the United States, culminating in non-farm payrolls data on Friday.
A key US January manufacturing report is expected to give a reading of 55.2, showing an expanding sector for the sixth straight month.
Asian stocks slid yesterday after suffering their worst monthly drop in a year, while the US dollar gathered steam, as fiscal worries in the euro zone prompted investors to add to short positions in the single currency.
Royal Dutch Shell has shut down three oil flow stations in Nigeria's Niger Delta after a key crude oil pipeline was sabotaged, the company said.
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