Oil fell more than $1 to below $40 a barrel on Monday, extending the previous session's two per cent loss, on persistent fears about energy demand after a big rise in US unemployment renewed worries about the global economy.
The decline came despite news that Saudi Arabia plans to cut oil output to below its agreed Opec target, supply disruptions in Europe from the Russia-Ukraine gas dispute and tensions in the Middle East.
US light crude for February delivery fell $1.05 to $39.78 by 0654 GMT, adding to Friday's 87-cent loss. London Brent crude fell 32 cents to $44.10.
Oil's fall on Friday came after a US government report showed employers slashed jobs by 524,000 in December, driving the national unemployment rate to its highest level in almost 16 years.
"The market is also keeping an eye on other developments in Opec, Europe and tensions in the Middle East, but the consumption worry is still a big bear," said David Moore, a commodities strategist at the Commonwealth Bank of Australia.
Oil prices fell 54 per cent last year and have shed more than $100 from a peak of above $147 a barrel last July as the global downturn hits demand for fuel.