* Iran says OPEC could cut output again in March
* Russia-Ukraine gas row resolved
(Recasts with prices, detail)
By Christopher Johnson
LONDON, Jan 12 (Reuters) - Oil fell more than $2 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.
U.S. light crude for February delivery <CLc1> fell more than
6 percent to a low of $38.12, down $2.71, before recovering
slightly. By 1420 GMT, the contract was down $2.55 at $38.28.
London Brent crude was down $1.77 at $42.65.
U.S. jobless data on Friday set the tone for the market.
A U.S. 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 U.S. unemployment numbers on Friday started the latest
leg downwards. We have had a string of bad news, with companies
and economies all reporting negative data. It is almost
relentlessly bad," said Rob Laughlin, senior oil analyst at MF
Global in London.
Oil prices fell 54 percent 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.
SUPPLY CUTS
The world's top oil exporter, Saudi Arabia, plans to cut
output by up to 300,000 barrels per day (bpd) below its agreed
OPEC target, a proactive step to prop up a collapsing market,
industry sources said on Sunday. []
Riyadh has already lowered supply this month to 8 million
bpd, meeting its target under OPEC's pact to reduce overall
supplies by a record amount from Jan. 1.
Saudi Arabia's cutbacks add to similar moves earlier this
month by other OPEC producers including Iran, the United Arab
Emirates, Kuwait and Libya to curb supplies, although evidence
that oil producers are cutting output has not lent much support
to prices so far.
Iran's representative to OPEC was quoted as saying the group
could decide to reduce oil output again at its meeting in March
if crude prices fell further. []
The front months on oil futures have been taking the brunt
of the falls with the markets in steep contango. March U.S.
crude futures have been trading at a premium of more than $5
above February, while April is around $3 above March.
Traders say the wide price spread partly reflects a lack of
prompt demand but also a view that OPEC cuts will eventually
start to impact the market and support prices.
One worry was lifted from the oil market on Monday with a
deal between Russia and Ukraine to resume Russian gas supplies
via Ukraine to Europe []
In the Middle East, Israel leaders trying to find a knockout
blow for Hamas militants defying a 17-day-old assault have
thrown army reservists into the battle. []
Most oil analysts said they were bearish for prices in the
short term.
Goldman Sachs Commodities said in a research note on Friday
that a market surplus was expected to drive inventories higher
and put pressure on its forecast oil price of $30 a barrel for
the first quarter of 2009.
But it maintained its forecast that oil would recover to
around $65 per barrel by the end of this year as the market
rebalances in the wake of the global recession.
(Additional reporting by Fayen Wong in Perth; editing by
William Hardy)
