Oil dips further on Japan recession announcement

Singapore: Oil prices fell below $56 a barrel on Monday in Asia as news that Japan fell into recession highlighted investor fears of a global economic slowdown that will hurt crude demand.

Light, sweet crude for December delivery was down $1.11 to $55.93 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract fell $1.20 on Friday to settle at $57.04.

Japan, the world's second-largest economy, said it slid into a recession for the first time since 2001 after gross domestic product contracted at an annual pace of 0.4 per cent in the third quarter after a shrinking 3.7 per cent in the second quarter. Japan now joins the 15-nation euro-zone in a recession, defined as two straight quarters of GDP contraction.

"Markets are very worried about the international economic outlook, about oil consumption," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "As data is released in the US, Europe and other countries, investors get a reminder of the economic problems in the developed world."

Oil prices have tumbled about 62 per cent since peaking at nearly $150 a barrel in mid-July.

On Sunday, Opec President Chakib Khelil made comments downplaying the possibility that the group could cut production at a meeting this month, which also weighed on prices.

A stronger US dollar also helped push oil prices down. Investors often buy oil futures as a hedge against inflation and a weaker dollar and sell when the dollar gains.

The euro fell to $1.2561 on Monday from 1.2602 on Friday while the dollar was steady at 97.22 yen.

"The firm US dollar is certainly a factor in why the oil price is lower," Moore said.