New York's main futures contract, light sweet crude for April delivery, dropped 54 cents to USD 41.11 a barrel.

Brent North Sea crude for April shed 59 cents to USD 43.11 a barrel.

"The rather grim near-term economic outlook remains a drag on oil prices," said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.

Market jitters over the deepening global economic crisis and financial system meltdown continues to hammer sentiment, particularly as the United States, the world's largest energy consumer, sinks deeper into recession, analysts said.

"Crude oil is trading near the USD 40 a barrel level as traders are losing faith in the possibility that the US economy will rebound this year," said David Evans, an analyst at BetOnMarkets.com.

"Oil prices are expected to be very volatile this week especially towards the end of the week when the (US) employment data will be released."