The latest falls came after the International Energy Agency said world demand for oil would be less than previously expected due to persistently high prices and lower expectations of economic growth in advanced economies.
The IEA now expects global oil demand to reach 89.2m barrels a day in 2011 - a rise of 1.3m barrels a day over 2010 but 190,000 barrels a day less than last month's forecast.
Last week, Brent crude oil fell by almost 10%. The startling drop came after negative data raised fears that the global economy may be slowing down.
The latest and heaviest blow has been disappointing US jobs data which showed new claims for jobless benefits rose by 43,000 to 474,000, the highest since August, while productivity growth slowed. Economists had expected jobless claims to fall.
Oil prices also felt the pressure of inventory figures which reported stocks as being 3.4m barrels higher last week, more than the 2m expected.
A surprise fall in German factory orders and signs that China and India's economic growth engine was running out of steam has also added to the gloomy outlook for resources.
Commodity-hungry China and India have been forced to raise interest rates to dampen runaway domestic consumption and surging inflation.
Recent factors pushing the oil price down;
• Fears of a global slowdown
Doubts over the recovery in the US - the world's largest economy - are nothing new. However, these are now being seen in tandem with worsening signs from Europe and the fast-emerging, fast-consuming economies in India and China. Those countries have been the bedrock upon which the case for higher oil prices in the long term has been built.
• The natural disater in Japan
The earthquake and resulting tsunami and nuclear crisis in Japan has put a huge question mark over the economy there. While rebuilding will eventually cause a spike in demand, the slowdown in economic activity of the world's third largest economy has pushed expectations of global oil demand lower.
BACKGROUND: OIL PRICESThe first half of 2008 saw a super-spike in commodities, led by oil. With the seriousness of the credit crunch yet to sink in, crude rocketed to $147 a barrel in July. The rally was based on:
• Soaring demand from China et al
• Dwindling petroleum reserves
• Increased unrest in the Middle East
• Increased pressure from oil speculators (read more on this below).
In common with most other assets, the price of oil then tumbled, bottoming out below at a little above $30.
Put simply, the oil importing countries - us, the Americans, most of the rest of the world - were flying less, buying fewer cars and spending less on products that need to be transported to us from around the world.
The slowdown in the global economy, as credit to consumers and businesses dries up, has hit demand hard. Falling car sales and reduced airline traffic as consumers tighten their belts has meant less demand for oil.
The drop off in demand, while predicted to happen, has come much sooner and is sharper than most economists expected.
Reductions in activities dependent on oil are not the only things pulling the oil price down. Oil is priced in dollars and the strengthening of the greenback means that a barrel of oil is effectively more expensive for buyers ' weakening demand even further.
How oil fell from the 'super-spike' in 2008
WHAT DOES THE OIL PRICE DEPEND ON?
The price of a barrel of oil is the result of a number of competing factors: How much oil is available, how much oil is demanded by consumers, how much it costs to get oil from the ground to the consumer, the price of dollars and the potential that oil speculators see for the price to rise and fall.
Many of the long-term global trends point to steady increases in the price of oil. Reserves are finite so the commodity is slowly becoming scarcer ' something that pushes the price up.
The explosion of development in countries like China and India has created more demand as those and other developing regions industrialise. They build more roads and increase manufacturing ' it all requires oil.
The bearish argument is that technological new energy developments - solar, wind, etc - should begin to reduce the world's dependence on the black stuff.
Supply is fettered by the countries that export it. The Organisation of the Petroleum Exporting Countries (Opec) meets regularly to set the amount they are willing to release onto the market. Opec oil accounts for approximately 35m of the 80m barrels released onto the global market each day.
Opec can reduce output as a means to push prices higher and can increase it to meet greater demand. It is tempting to think that all the producers are motivated simply by a high price. In fact, for some countries it may be beneficial to have a lower price if it means they can maintain, or increase, the volumes they sell.
Oil is priced in dollars so movements in that currency also impacts on crude. The weaker the dollar, the higher the dollar price of oil because it takes more dollars to buy a barrel.
There is one more factor that is thought to influence the price of oil. It is possible for investors to speculate on the price of oil by purchasing futures contracts. Investors ' they could include investment banks, hedge funds or pension funds ' will buy a quantity of oil to be delivered at a future date. If the price of oil has risen by the time the contract is delivered, the investor makes money. It became a contentious issue in 2008 when critics alleged that this type of speculation helped to push the price of a barrel to a record $147.
However, investors have defended the process, arguing that speculation does nothing to reduce the actual amount of oil on the market, which would push the price up, and that other commodity markets have shown greater increases than the oil market with no price speculation Source thisismoney.co.uk..
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