Oil prices tumbled below $40 a barrel Monday as reports from manufacturers like Toyota and Caterpillar pointed to a worsening global economic climate and serious deterioration in energy demand.
Light, sweet crude for February delivery fell $2.45, or nearly 6 percent, to settle at $39.91 a barrel on the New York Mercantile Exchange. Crude prices have tumbled 70 percent since peaking above $147 in July.
Phil Flynn, an analyst at Alaron Trading Corp. in Chicago, said even cold weather and a falling dollar haven't been enough for a rally. "Concerns about economic weakness still seem to be overshadowing the entire complex."
Caterpillar Inc. said it would cut executive pay by up to 50 percent next year because of weakening demand.
Crude producers have not been able to cut output fast enough.
The Organization of Petroleum Exporting Countries said last week it would slash production by 2.2-million barrels a day, trying to stem the price decline. OPEC leaders say if prices do not return to around $70, exploration and production could be cut. That, many experts warn, could lead to future price shocks when the economy rebounds.