Analysts said traders were reassessing positions after crude oil prices dropped about 10 percent on Monday as stock markets around the world tanked over financial meltdown fears.
Investors who had bet on falling oil prices covered positions as they monitored the situation in Nigeria, said Andy Lipow at Lipow Oil Associates.
An oil pipeline operated by the British-Dutch energy giant Shell that feeds into the key Escravos export terminal in southern Nigeria exploded over the weekend, curtailing production.
Shell did not reveal details on the output reduction or what caused the explosion.
The company has been a regular target of attacks by militants in southern Nigeria over the past three years.
"The market is going to start now looking ahead for the next OPEC meeting" on March 15, Lipow said.
Oil prices had risen overall last week in anticipation of increasing demand for motor fuel in the United States and indications of OPEC output cuts, traders said.
Market jitters over the deepening global economic crisis and financial system meltdown continued to hammer sentiment, particularly as the United States, the world's largest energy consumer, sinks deeper into recession.
"Crude oil is trading near the 40 dollars a barrel level as traders are losing faith in the possibility that the US economy will rebound this year," said David Evans, analyst at BetOnMarkets.com.
"Oil prices are expected to be very volatile this week especially towards the end of the week when the (US) employment data will be released."
Source: AFP
Author: Ksenia Kochneva
