Oil prices fell below USD 42 a barrel on Friday in Asia after Russia and Ukraine said a dispute over natural gas payments wouldn't affect shipments to Western Europe.
Light, sweet crude for February delivery fell USD 3.05 to USD 41.55 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Singapore.
Trading was closed on Thursday for New Year's Day.
The contract rose USD 5.57 on Wednesday, the last trading day of 2008, to settle at USD 44.60 after Russia threatened to cut off natural gas supplies to Ukraine.
Russia followed through with that threat on Thursday, though both countries pledged they would keep supplies to the rest of Europe flowing.
Russia's gas monopoly Gazprom shut off gas supplies after talks broke down over Ukraine's payments for past shipments and a new price contract for 2009.
Gazprom said it had boosted natural gas deliveries through other pipelines to Western Europe.
The European Union depends on Russia for about a quarter of its gas, with some 80 per cent of that delivered through pipelines controlled by Ukraine.
Concerns that the week-old conflict between Israel and Hamas in Gaza could disrupt supplies in the oil-rich Middle East helped keep prices from falling further.
Israeli troops massed on the Gaza border on Thursday in preparation for a possible ground offensive.
Oil prices began 2009 the same way they spent the most of the second half of 2008, going down.
Crude peaked at USD 147.27 a barrel in July before plummeting to as low as USD 33.87 on 19th Dec.
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