Oil falls nearly 6 percent on slowing demand

By Matthew Robinson

NEW YORK (Reuters) - Oil dropped nearly 6 percent to below $40 a barrel on Monday on signs the global economic malaise was slowing fuel demand further.

Apparent oil consumption in China fell by 3.2 percent in November from a year ago, according to Reuters calculations, while crude imports into the world's No. 2 energy consumer dropped to the lowest level this year.

U.S. crude for February delivery settled down $2.45 at $39.91 a barrel. The January contract touched $32.40 on Friday before expiring, the lowest since February 2004, weighed down by rising stock levels at the Cushing, Oklahoma, delivery point for the New York Mercantile Exchange contract.

London Brent crude settled $2.55 lower at $41.45 a barrel.

"Chinese crude oil imports in November fell to their lowest level this year," John Kilduff, senior vice president at MF Global, wrote in a report. "Additionally, the Chinese central bank has made its fifth interest rate cut this year in an attempt to keep growth from faltering."

China on Monday cut interest rates for a fifth time since September, and Japan warned it was sliding deeper into a recession encroaching steadily on the global economy, closing factories and throttling trade.

Oil prices have fallen more than $100 since July as the global financial turmoil threatens to trigger the first contraction in world energy demand since 1983.

U.S. stocks slid on Monday as the economic slowdown continued to eat into corporate profits and outlooks, while retailers tumbled on worries of lacklustre Christmas sales.