Oil prices fell again Tuesday on concerns about demand for the commodity amid weak global economic growth.
Prices have slumped for months as the market has become increasingly oversupplied and producers have been unwilling to cut output. While much of the global glut of crude is due to rising production, particularly in the U.S., concerns about weak demand have also weighed on the market.
Continue Reading Below
On Monday, the International Monetary Fund downgraded its global economic outlook, adding to worries that global oil demand will be unable to keep up with supply.
"The global economy's going to continue to weaken, and crude prices are going to continue on their path to the point where we start to see production drop in the U.S.," said Matt Smith, commodity analyst at Schneider Electric SA, an energy-consulting firm.
On the New York Mercantile Exchange, light, sweet crude for delivery in February fell $2.30 below Friday's settlement, down 4.7% to $46.39 a barrel. The U.S. market did not settle Monday due to a federal holiday.
The February contract expired at settlement Tuesday. The more-actively traded March contract fell $2.66, or 5.4%, to $46.47 a barrel.
Brent crude, the global benchmark, fell 85 cents from Monday's settlement, or 1.7%, to settle at $47.99 a barrel on London's ICE Futures exchange. Brent posted steep losses on Monday, so the drop in the Nymex price on Tuesday reflected U.S. investors catching up.
Adding to the global growth concerns, China on Tuesday reported its slowest growth in a quarter century. China is the No. 2 oil consumer and the top importer of oil.
Reports that Iraqi oil output hit a record in December also weighed on prices.
Between the IMF forecasts and Iraqi production reports, "you have a hit from demand, you have a hit on supply--a double whammy to the downside," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc.
Abundant supply and tepid demand for oil have sent shock waves through the markets, with crude shedding close to 60% of its value since a peak in June. While the low prices are a boon for consumers and businesses in importing countries, the positive effects are being offset by weaker investment and a stronger dollar, the IMF said.
"The price of oil is a shot in the arm in the short term," IMF chief economist Olivier Blanchard told The Wall Street Journal. "But it is just not enough to compensate for weakness in the world economy."
The fund cut its global growth forecast for 2015 by 0.3 percentage point to 3.5%. It added that, for many oil importers outside the U.S., the boost from lower oil prices is muted by local-currency depreciation against the U.S. dollar. Oil is traded in dollars, so a strong dollar makes oil more expensive for buyers using foreign currencies.
China said its economic growth in 2014 slowed to 7.4%, its weakest rate in decades. Growth in the fourth quarter was 7.3%, a bit stronger than expected, while industrial production also overshot consensus forecasts.
"The China figures give a mixed sentiment to the market," Phillip Futures said in a report. "The figures display a weak current situation due to weaker GDP figures. However, with a higher industrial production, this suggests that the longer term remains positive."
The short-term picture for oil, however, remains bearish as the 93 million-barrels-a-day global market continues to be oversupplied by at least 1.5 million barrels a day, analysts say.
"The reason for the pullback has largely been because the economic conditions have yet to change," said Jameel Ahmad, chief analyst at FXTM. "There remains a supply surplus and until this is significantly altered, the chances of a recovery in price will be very low."
Gasoline futures for February delivery fell 4.6 cents, or 3.4%, to $1.3128 a gallon. February diesel lost 3.9 cents, or 2.3%, to $1.6266 a gallon.
(Eric Yep and Ian Talley contributed to this article.)