LONDON - U.S. oil prices fell below $35 a barrel on Wednesday, continuing Tuesday's nearly 7 percent slide on renewed economy concerns, slumping demand and bloated inventories.
U.S. crude for March delivery fell 4 cents to $34.89 a barrel by 10:53 a.m. EST, while London Brent crude for April delivery was down 92 cents to $40.11 a barrel.
The crude market is still hanging on to the low end of its range, said Tom Bentz, an analyst at BNP Paribas Commodity Futures Inc. in New York.
The market is waiting for inventory reports over the next couple of days and positioning ahead of Friday's March crude expiration, Bentz said.
With the March U.S. crude contract due to expire on Friday, the April contract's premium narrowed to around $3.60 on Wednesday versus nearly $8 last week, a sign traders believe swollen inventories in Cushing, Oklahoma may persist.
Traders said Brent crude fell below the level of $41.80 a barrel, which analysts studying past price patterns had identified as significant.
We've seen Brent go through some technical levels, though the volume in open interest is decreasing. It's not necessarily a strong move, but it may help unify OPEC behind their call for more supply cuts, said Julian Keites, energy derivatives director at Newedge in London.
The Organization of the Petroleum Exporting Countries, a supplier of more that a third of the world's oil, has been seeking to cut up to 4.2 million bpd of output since September to prop up prices.
Earlier this month the producer group said its members had delayed 35 new projects due to low prices and the slowdown in demand, and some OPEC countries have raised the prospect of another supply cut at their next meeting in Vienna on March 15.
The U.S. Energy Information Administration will release its weekly inventory data report on Thursday, but a Reuters poll of analysts on Tuesday showed an average forecast for an increase of 2.6 million barrels, nearing an 11-year high.
U.S. auto makers unveiled new survival plans seeking billions of dollars in extra government funds on Tuesday, drawing skeptical responses and investor doubts about a return to profitability.
Analysts said the bailout request and Obama administration plans to help homeowners would weigh on crude on Wednesday.
We look for increased volatility in all markets during Wednesday's session...of the two, the focus will be more on Detroit, Edward Meir of MF Global wrote in a note.
The news across Asia has been almost uniformly bad, with Japan, the world's second-largest economy, reeling from its worst downturn in a generation. The Nikkei stock average <.N225> fell 1.5 percent to its lowest close in nearly four months. <.T>
The financial crisis has left much of the world in recession and hammered oil consumption, pulling crude prices from record highs above $147 a barrel hit in July.
Traders will also watch for data on U.S. housing starts and January industrial production, as well as the Redbook retail sales index for February to look for new indications on the health of the world's top economy.
(Additional reporting by Dharmasari Haroun and Chua Baizhen in Singapore; editing Anthony Barker)