Oil falls towards $38 as demand weakens

London: Oil fell more than 6 per cent towards $38 a barrel on Monday, dragged down by growing evidence that recession is reducing global energy consumption.

The decline came as Russia and Ukraine signed a deal to help secure the resumption of Russian gas supplies to Europe, cut off for nearly a week in freezing temperatures.

US light crude for February delivery hit a low of $37.92, down $2.91, before recovering slightly. By 1535 GMT, the contract was down $2.50 at $38.33. London Brent crude was down $1.60 at $42.82.

US jobless data on Friday set the tone for the market.

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.

Oil prices fell 54 per cent last year and have shed more than $100 from a record peak of above $147 a barrel last July as the global economic downturn hits demand for fuel.