Oil prices fell below $60 a barrel on Monday, extending last week's losses to languish at a seven-week low, as lingering concerns about the pace of a global economic recovery encouraged a further sell-off.
Oil prices dropped 11 percent last week in their biggest weekly decline since late January amid mounting worries that a economic rebound may not be coming soon to help spur flagging fuel demand.
Crude oil for August delivery fell 55 cents to $59.34 by 12:21 a.m. EDT. London Brent crude fell 40 cents to $60.12.
Economic concerns are continuing to weigh on oil prices. The rally we saw last month was clearly overdone, said Daniel Liu, an energy strategist at MF Global Singapore Pte Ltd.
We believe oil prices will see a further correction to fall to around $55, before it bounces up when confidence on the global economy returns to the market.
Oil prices shot up 40 percent last quarter and touched an eight-month high of above $73 a barrel, as investors shrugged off weak fundamentals and banked on hopes of a swift global economic recovery.
But a recent slew of bearish data around the globe, which suggested that some of the world's largest economies were still not out of the woods, has prompted a sell-off frenzy.
Oil's decline on Friday was encouraged by a report that U.S. consumer sentiment wilted in early July to its weakest since March, according to data by the Reuters/University of Michigan Surveys of Consumers, adding to the recession worries that also dragged U.S. stocks lower.
Analysts said oil prices would continue to track equities markets in the short term. And with Wall Street's rally stalled, this week could be crunch time as big banks' earnings, including Citigroup's
Key economic data from China, including gross domestic production in the second quarter, industrial output and retail sales, due to be released on Thursday, will also be keenly watched by investors.
Analysts at BNP Baribas said oil prices could see more corrections in the short term as external factors which have helped oil's recent rally, including a weak U.S. dollar and rising equities, are set to reverse course.
Focus will shift back to oil fundamentals which remain weak -- oil demand will contract with the world economy, and OPEC has a large inventory hurdle to overcome, BNP's Harry Tchilinguirian said in a report.
Investors have also been made cautious by U.S. government moves to reign in speculation in energy and metals markets, while the Commodity Futures Trading Commission could have new regulations in place by late October.
Separately, an oil tank blew up at a chemical plant in Urumqi, capital of northwest China's restive Xinjiang region, on Sunday, but local police and refinery officials ruled out a deliberate attack.
In Nigeria, a top rebel leader is expected to be freed early this week, his lawyer said on Sunday, but analysts doubt his release will lead to a significant drop in militant attacks in Africa's biggest oil sector.
(Editing by Ben Tan)