Oil Falls on Gaza Ceasefire, Russia-Ukraine Gas Accord

Oil prices fell on Monday as signs of a resolution of a gas row between Russia and Ukraine and after a ceasefire between Israel and Hamas in Gaza eased supply concerns.

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The market remained under pressure from expectations the weakening global economy would erode oil demand.

The International Energy Agency and other forecasters cut their 2009 demand forecasts last week.

"Right now the economy is dominating," said Harry Tchilinguirian, analyst at BNP Paribas. "The market is very volatile and the signs are that demand is weakening."

U.S. oil futures for March were down below $41 a barrel. Futures for February delivery also fell.

Traders said the February U.S. crude oil futures contract, which expires on Tuesday, also fell because of very high stocks at the delivery point for the U.S. futures contract.

Only just over 2,600 lots were traded on the February U.S. crude contract.

The March contract was much more active as more than 21,000 lots changed hands.

London Brent crude for March fell to a low of $44.20, before recovering slightly, but was still down on the day.

Russia and Ukraine were aiming to sign an agreement on Monday to restart gas flows to Europe through Ukraine after finally agreeing a price for 2009 supplies.

Also easing concern about energy supplies, Israeli forces began to pull out of the Gaza Strip following a tentative truce with Hamas after the three-week war, easing tension in a region which pumps about a third of the world's oil.

Prices came under pressure on Friday after the IEA, an adviser to industrialised countries, joined the ranks of forecasters predicting a fall in world oil demand in 2009.

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OPEC, the oil exporters' group, has cut production three times since September to try to stem falling prices.

It might consider reducing output again, Algeria's oil minister Chakib Khelil said on Saturday.

Oil has collapsed by more than $110 a barrel since reaching a record high of $147.27 a barrel in the summer as the global economic slowdown has eroded demand and consumer spending.

Still, some in the oil market think there is little room for prices to fall much further.

"It looks as if Brent will hold in the current $40-$50 range," said Christopher Bellew, a broker at Bache Commodities. "I do not anticipate new lows."

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