NEW YORK (AP) -- Oil prices fell to below $35 a barrel Monday as investors eyed a slew of U.S. corporate earnings this week for signs of weakening consumer demand amid the worst recession in decades.
Light, sweet crude for February delivery was down $1.88 to $34.63 a barrel by mid-afternoon in Europe in electronic trading on the New York Mercantile Exchange.
The contract, which expires on Tuesday, rose $1.11 on Friday to settle at $36.51. The March contract was trading at $40.90 a barrel, down $1.67.
In London, the March Brent crude contract fell $1.87 to $44.70 a barrel on the ICE Futures exchange.
The large spread between the Nymex and Brent contracts was attributed in part to the "brimming stock situation" in Cushing, Oklahoma, the delivery point for the Nymex contract, said analysts at JBC Energy in Vienna.
The oil market is closed in the U.S. on Monday for Martin Luther King Jr. Day and on Tuesday the attention of some investors will be diverted to Washington with the inauguration of President-elect Barack Obama.
Other geopolitical factors also were seen as bearish for prices.
"The easing of the conflict in Israel-Gaza and the promise of a signed resolution (Monday) of the Russian-Ukraine gas supply dispute may weigh on price sentiment already subdued by the weight of lower demand forecasts," said a report from Sucden Financial Research in London.
Investors expect to glean more insight into the extent of the current downturn when hundreds of companies report fourth quarter results this week, including heavyweights Google Inc., US Bancorp, General Electric Co., Microsoft Corp. and Johnson & Johnson.
Investors are bracing for bad numbers after banking giant Citigroup on Friday said it lost $8.29 billion in the fourth quarter and that it was splitting in two to help restore profits.
Concern that a recession in developed countries may be worse than previously expected -- and that it's eating away at demand for oil -- has sent crude prices down about 30 percent from $50.47 a barrel earlier this month and down about 75 percent from $147.27 in July.
"In the short-term, demand is collapsing and the price is going to fall," said Richard Urwin, who helps manage more than $10 billion of stocks, bonds and other investments, including Asian assets, for BlackRock in London. "The risks for the moment are on the downside."
The Organization of Petroleum Exporting Countries has announced production cuts of 4.2 million barrels a day since September, and the group's members are showing signs of implementing the output reductions.
But many investors are worried the cuts won't be enough as demand from around the world evaporates.
"The OPEC output cuts aren't going to offset demand weakness," Urwin said.
The fall in demand means oil producers have more spare capacity than six months ago, so in the event demand rises on the back of an economic recovery, producers will be able to easily meet that demand, which would slow any jump in prices.
"Even if we see an economic recovery later in the year, I don't think oil is going to rebound very quickly because the degree of excess capacity is quite big," Urwin said.
In other Nymex trading, gasoline futures were down 2.47 cents to $1.1425 a gallon. Heating oil fell 4.26 cents to $1.4308 a gallon while natural gas for February delivery dropped 8.1 cents to $4.72 per 1,000 cubic feet.
Associated Press writer Alex Kennedy in Singapore contributed to this report.