By Joe Brock
UPDATE 1: Oil prices react to further fears of falling demand, based on rising US crude stocks.
Oil fell more than one dollar towards $41 a barrel on Thursday, as data showing a further build in crude stocks in the United States heightened expectations of falling demand for oil from the world's largest fuel consumer.
The market will watch for weekly jobless claims and December durable goods orders later on Thursday, as well as advance fourth-quarter gross domestic product data on Friday, for further clues on the health of the US economy.
US crude fell $1.09 a barrel to $41.07 by 04.46pm UAE time, while London Brent crude lost 31 cents to $44.59. "US crude has weakened again. The 300,000 barrel stock build in Cushing and the general crude stock build has caused this," said Christopher Bellew, a broker at Bache Commodities in London.
US crude oil inventories jumped last week for the fifth week in a row amid lower demand from domestic refiners curbing operations for first-quarter maintenance programs or for economic reasons, government data on Wednesday showed.
Expectations that data to be released later in the day is likely to give a grim reading of the US economy weighed on market sentiment and sparked an early bout of selling.
Durable goods orders, due at 5.30pm UAE time, are estimated to have fallen two percent in December after a 1.5 percent decline in November, economists polled by Reuters said.
US weekly jobless count is expected to show that 580,000 people filed new claims for state unemployment insurance in the week ended Saturday, following a week with 589,000 new claims.
All eyes will be on the government's first snapshot of the US economy in the fourth quarter, due on Friday, which will show it at its weakest in 26 years, hit by plunging consumer spending and surging unemployment rates.
Remarks by OPEC Secretary General Abdullah Al Badri at the World Economic Forum in Davos, Switzerland that OPEC would not hesitate to act again if oil price remains low offered support to crude prices.
OPEC's output cuts since second-half 2008, in reaction to the fall of more than $100 in oil prices since July, have also helped to put a floor under prices.
Badri said on Wednesday OPEC is expected to have fully delivered on its pledged supply curbs by the end of this month, but a weak economy would continue to erode demand for fuel.
OPEC next meets on March 15 to decide output policy.
Martin King, analyst with FirstEnergy Capital Corp, said OPEC had done a much better job of cutting supplies from the market than many had expected, setting the stage for a gradual price rebound in the second half of 2009.
"We see the crude market on the cusp of achieving real signs of stability, driven in part by tighter supplies out of OPEC." (Reuters)