Crude oil fell for a second day in New York on speculation that a deepening global recession is reducing fuel demand in Asia, undermining OPEC's efforts to boost prices by cutting production.

Japan's crude imports and South Korean fuel demand dropped in November, and slumping Chinese growth prompted the nation's central bank yesterday to cut rates for the fifth time in three months.

The Organization of Petroleum Exporting Countries is ``determined'' to stabilize oil markets, Saudi Arabian Oil Minister Ali al-Naimi said Dec. 21.

``Even if OPEC cuts, and it still stays bearish on demand, it will require further cutbacks in supply,'' said Mark Pervan at Australia & New Zealand Banking Group Ltd. in Melbourne. ``We've still got more weak demand data to come out and that will put more downside risk for price.''

Crude oil for February delivery fell as much as 86 cents, or 2.2 percent, to $39.05 a barrel. It was at $39.47 a barrel at 3:25 p.m. Singapore time on the New York Mercantile Exchange. Prices have dropped 73 percent from a record $147.27 on July 11.

January futures, which expired last week, plunged 6.5 percent to $33.87 a barrel on Dec. 19, the lowest settlement for a contract closest to expiration since Feb. 10, 2004. Oil has declined 27 percent in December and dropped 59 percent this year, snapping six years of gains.

U.S. supplies climbed in 11 of the past 12 weekly reports from the Energy Department as consumption dropped. Inventories probably rose 900,000 barrels last week, according to the median of analyst responses in a Bloomberg News survey. The department is scheduled to release its next report at 10:35 a.m. tomorrow in Washington.

We should be hearing more bad news from 4th quarter corporate earnings, hence we should be seeing oil price falling below $35 in the first quarter of 2009.