(Updates prices)
* Oil down around 1 percent in thin trading on U.S. holiday
* Falling oil demand increasingly expected
* Gaza ceasefire and end of Russian gas row add to downside
By Maryelle Demongeot
SINGAPORE, Jan 19 (Reuters) - Oil fell more than 1 percent
towards $36 a barrel on Monday in holiday-thinned trading,
erasing some of the late gains made last week on short
covering, with worries about weakening oil demand again at the
forefront.
A ceasefire between Israeli forces and Hamas in Gaza,
together with the resolution of a gas row between Russia and
Ukraine, eased supply fears that had helped put a floor under
falling prices.
Activity was thin with the U.S. closed for the Martin
Luther King Holiday and ahead of expiry of the February Nymex
contract on Tuesday.
U.S. light crude for February delivery <CLc1>, which
expires on Tuesday, slid 45 cents to $36.06 a barrel by 0558
GMT, with only 345 lots traded, having settled up 3 percent on
Friday at $36.51 on short-covering in pre-holiday trade.
The March contract was more actively traded with 2,024 lots
changing hands, and fell 31 cents to $42.26.
London Brent crude <LCOc1> fell 27 cents at $46.30.
"The combination of drastic supply cuts with continuing
global economic turmoil leading to receding consumer demand
will certainly inject uncertainty, and thus volatility, into
the energy markets for some time to come," Jonathan Kornafel,
Asia Director of U.S.-based options house Hudson Capital
Energy, said in a report.
The International Energy Agency, a leading energy watchdog,
cut its estimate for 2009 demand by 940,000 barrels per day to
85.3 million bpd, a fall of about 500,000 year-on-year on
Friday as the economic slowdown erodes consumption.
[]
Acknowledging the gloomy market situation, Iran's Oil
Minister Gholamhossein Nozari was quoted as saying on Saturday
that his Ministry anticipates a crude oil price of about $40 a
barrel in 2009. []
Falling prices could prompt OPEC to consider reducing
output again, Algeria's energy and mines minister Chakib Khelil
said on Saturday, adding that he expected a sharp decline in
oil demand in the second quarter this year. []
Israeli forces began to pull out of the Gaza Strip on
Monday following a tentative truce with Hamas after the
three-week war, taking some of geopolitical risk premium out of
the market. []
In the days after the Israeli offensive, oil prices rallied
as much as 12 percent on fears that oil supplies from the
Middle East could be affected.
Also taking out some of the supply worries that had
supported prices earlier this month, Russia and Ukraine aim to
sign an agreement on Monday to restart gas flows to Europe
through Ukraine after finally agreeing a price for 2009
supplies.
The two former Soviet neighbours, whose pricing dispute
left parts of southeast Europe without gas in the middle of
winter, said on Sunday they had agreed an outline deal that
would quickly restore supplies. []
(Editing by Michael Urquhart)
