Oil Prices Back Below $40 on Production Fears

New York, NY, Jan. 12, 2009--Crude oil prices fell below $40 in New York on concern that production cuts by the Organization of Petroleum Exporting Countries will fail to counter a slump in demand.

Oil consumption will fall by 1 million barrels a day this year as the U.S., Europe and Japan face their first simultaneous recessions since the Second World War, Deutsche Bank AG forecast last week.

U.S. stockpiles have climbed in 13 of the past 15 weeks, according to the Energy Department. OPEC members signaled last week they will curb sales to refiners in February.

Crude oil for February delivery fell as much as $2.40, or 5.9 percent, to $38.43 a barrel in electronic trading on the New York Mercantile Exchange. It was at $38.52 a barrel at 11:28 a.m. in London.

China, the fastest-growing oil consumer, may miss the government’s 8 percent economic growth target, two top officials said.

OPEC may trim production further should crude prices continue to decline, Iran’s OPEC Governor Mohammad Ali Khatabi said Jan. 11.