Oil recovers from fall,edges towards $36

US light crude for February delivery rose 28 cents to $35.68 a barrel by 0407 GMT,partially reversing some of the previous session’s $1.88 fall. The contract,which expires on Tuesday,touched a low of $33.20 on Thursday,the weakest since Dec. 19.

London Brent crude for the new front-month March contract rose 18 cents to $47.86 a barrel,maintaining an unusual premium to the US benchmark,supported by the recent disruption of Russian gas supplies to Europe.

“Concerns over weakness in oil consumption remain a drag on the oil price,” David Moore,a commodities strategist at the Commonwealth Bank of Australia,said in a research note.

The gloomy global economic outlook prompted OPEC to forecast a fall of 180,000 barrels per day (bpd) in world oil demand this year,six times higher than its previous estimate.

The cartel,which has already cut 4.2 million bpd from the world market since September,could quickly deepen output cuts if needed,OPEC President Botelho de Vasconcelos said Thursday.

Grim Outlook

Data showed that the number of US workers filing new claims for unemployment benefits rose last week and US foreclosure activity jumped 81 percent in 2008.

Other statistics showed factory activity in New York state and the Mid-Atlantic region shrank in January and that US producer prices fell for a fifth straight month in December.

And there appears to be little relief in sight,with CPI data due later on Friday expected to show a drop of 0.9 percent in December,while a preliminary index of January consumer sentiment in January is expected to erode to 59.0 from 60.1 in December.

The University of Michigan consumer sentiment has been a fairly accurate gauge of changes in the consumer outlook over the past year,mainly due to the price of basic commodities and gasoline.

The American Petroleum Institute on Thursday said US demand for crude oil and petroleum products slid 5.9 percent in December from a year earlier,with demand in 2008 dropping at the fastest rate in almost three decades.

The financial crisis,which first surfaced in the United States over housing loan defaults,is forcing a growing number of major economies into recession. Energy consumption has waned sharply,prompting oil prices to tumble more than $110 since July.

US refiners facing the downturn have been putting crude into storage instead of into processing units,pushing stockpiles at the Cushing,Oklahoma,storage hub — the delivery point for crude futures — to record highs. Oil producers have also been storing large amount of crude in their floating vessels.

Analysts said the glut in global crude supplies would continue to cap oil prices for the rest of this year.

“With between one-half and one day of global demand on the water in floating storage,OPEC would have to tighten the market by one-half to 1 million bpd below current demand levels for an entire quarter to get rid of the surplus,” JP Morgan said in a research note led by Lawrence Eagles.