Oil hovers below $42 per barrel

By 0341 GMT,US crude was up 27 cents a barrel at $41.71,off an intraday low of $41.31,while London Brent crude gained 25 cents to $45.65.

Oil has fallen about 10 per cent over the week and is down 6.7 per cent over the past month,which would be its best performance since end-August.

Oil sank 1.7 per cent on Thursday after reports underscored a deepening recession in the United States. The jobless rate rose to a record peak in January,while in December sales of new US single-family homes fell to the lowest level ever and new orders for durable long-lasting manufactured goods tumbled for a fifth month.

Shrinking demand for fuel has also contributed to the biggest four-month build-up in US crude stockpiles since 1990.

“The risk is still clearly on the downside. The economic data is going to confirm that things are still slowing down,” said Mark Pervan,senior commodity strategist at ANZ Bank in Melbourne.

“Oil’s big Achilles heel is the US market,and that’s going to continue to weigh on prices.”

All eyes will be trained on the government’s first snapshot of the US economy in the fourth quarter,due at 1330 GMT,which will show it at its weakest in 26 years.

The dismal forecast comes atop the International Monetary Fund’s projection on Wednesday that world economic growth this year will fall to its slowest since World War Two.

Unemployment in Germany,Europe’s largest economy,rose nearly twice as much as expected in January.

Asia’s outlook was equally bleak. Data showed unemployment in Japan at a near three-year high and industrial output plunging by a record 10 per cent last month,reinforcing expectations of a unprecedented contraction in the world’s second-largest economy.

But oil’s losses were limited by a potential US oil refinery worker strike that could affect gasoline and heating oil output,as well as Qatar’s deepening supply curbs in March.

A possible strike by 30,000 US refinery workers threatened on Thursday to shutter more than half of the nation’s oil refining capacity,though a top union negotiator expressed optimism a deal could be reached before Sunday’s deadline.

Qatar,one of OPEC’s smallest oil producers,has notified at least two Asian term buyers that it will deepen curbs on supplies of Qatar Marine crude in March compared with February levels,traders said on Friday.

OPEC’s supply cuts since second-half 2008,in reaction to the fall of more than $100 in oil prices since July,have helped support the market.

OPEC Secretary General Abdullah al-Badri said at the World Economic Forum in Davos,Switzerland that the cartel would not hesitate to act again if the oil price remained low,after remarking earlier this week the group would fully enforce supply curbs by the end of this month.

The cartel next meets on March 15 to decide output policy.

Pervan expects oil to trade in the mid- to low-end of a $30 to $40 range through February,with firm support around $31-$32.

“There’s a lot of sideline interest to get back into the market on the basis that there’s actually a very strong long-term outlook for oil,” he said.

“In the short to medium term,there’s going to be more pain,and the volatility will continue through February,as we go through a run of pretty weak economic data out of the US.”