Oil prices slip on US demand concerns

Agence France-Presse

Posted at Feb 06 2009 06:16 PM | Updated as of Feb 07 2009 02:16 AM

LONDON - Oil prices dipped towards $40 a barrel on Friday as concerns lingered about the strength of energy demand in the United States, a key consumer, ahead of crucial economic data.

New York's main futures contract, light sweet crude for delivery in March, slid $0.49 to $40.68 a barrel.

Brent North Sea crude for March dropped $0.26 to $46.20 per barrel.

Official data showed Thursday that initial claims for US unemployment benefits surged to 626,000 last week, the highest level since October 1982, heightening fears about the length of an economic slump.

"Crude oil fell on concern that fuel demand in the US, the world's biggest energy consumer, may decline as a report showed the number of newly jobless climbed to a 26-year high," said BetOnMarkets analyst Dave Evans on Friday.

"Look for oil prices to trade in a small range until the US employment figures are released," he advised.

Later Friday, traders will absorb the latest US labour report. Analysts predict the US economy shed about half a million non-farm payrolls in January.

Investors are bracing for bad numbers so they could be relieved if the report turns out to be less dire than expected.

The market was dragged lower this week by news of rising inventories in the United States, the biggest crude consuming nation, analysts said.

US government data showed Wednesday that American crude stockpiles had soared by 7.2 million barrels last week, more than double the 2.9 million barrels forecast by analysts.

It was the fifth consecutive week of gains, and the sharp rise underlined slack demand amid the global financial crisis that has brought the world economy to a near-halt.

After plunging from record highs above $147 last July, oil prices touched multi-year lows in December, at one point nearing $32 a barrel.

The Organisation of the Petroleum Exporting Countries (OPEC) last week signalled it would consider more reductions in output as its members try to lift prices and, in turn, their incomes.

OPEC, which pumps about 40 percent of the world's oil, announced production cuts totalling 4.2 million barrels per day late last year. The cartel is to meet again next month.