Oil tumbles below $38 on eve of US earnings season

Alcoa, chip maker Intel and biotech company Genentech will report fourth quarter results this week, giving investors a glimpse of how deep the current recession may be.

Oil prices fell 17 percent last week, weighed by fears that rising U.S. unemployment will undermine crude demand.

The Labor Department said Friday that employers slashed 524,000 jobs in December and 2.6 million jobs for all of 2008. The nation's unemployment rate jumped to 7.2 percent, the highest since 1993.

Meanwhile, the national retail average price for a gallon of regular gas fell 0.2 cents to $1.79 a gallon overnight, according to auto club AAA, the Oil Price Information Service and Wright Express. That is about 13 cents a gallon above what it was a month ago and about $2.32 below last July when prices peaked at $4.11 per gallon.

Prices bottomed out at the end of 2008 around $1.61 a gallon.

Raymond James analyst Darren Horowitz said in an analyst note that while the recession is dominating short-term prices, Saudi Arabia's weekend announcement that it would cut oil output by about 300,000 barrels per day below its target may lend support in the long term.

There are signs that the Russia-Ukraine gas dispute could be nearing an end.

Gazprom, Russia's gas company, said that Ukraine signed a deal Monday to allow independent monitors to track natural gas supplies from Russia to Europe with no additional conditions. The agreement could open the way for a resumption of gas shipments to Europe through pipelines that cross Ukraine.

In other Nymex trading, heating oil futures slid 2.5 cents to settle at $1.4724 a gallon, while natural gas for February delivery rose 2.6 cents to setle at $5.542 per 1,000 cubic feet. Gasoline futures dropped 2.7 cents to settle at $1.0841.

In London, February Brent crude fell $1.51 to settle at $42.91 a barrel on the ICE Futures exchange.