Oil prices take a $4 hit to US$40

AIG's huge corporate loss has reverberated into the energy markets as well today.

Oil prices plummeted more than 10 per cent this morning, with little to suggest energy demand will recover in the deteriorating global economy.

Benchmark crude for April delivery fell US$4.61 to settle at US$40.15 a barrel on the New York Mercantile Exchange.

In London, the price for Brent crude fell nearly 9 per cent, or US$4.14, to US$42.21 on the ICE Futures exchange.

Michael Lynch, president of Strategic Energy & Economic Research, said the relentless influx of grim headlines is keeping downward pressure on the market.

"We had the run-up last week, but now people are looking at weaker demand signals and that's making them think we're going to need another round of cuts from Opec," Lynch said.

Opec has already slashed more than 4 million barrels a day from daily production, according to most estimates.

Pessimism in the energy markets grows stronger every time the government must step in to prop up a major US corporation and the market is getting more of the same this week.

This morning American International Group (AIG) reported losses of US$61.7 billion in the fourth quarter, the largest quarterly loss in US corporate history.

- AP