By Jennifer Tan
UPDATE: Boost for crude on signs of recovery in energy demand as gasoline inventories fall.
Oil was steady above $42 a barrel on Thursday, after surging more than six percent overnight on US government data that showed a larger-than-expected drop in gasoline stocks.The market will eye US January durable goods orders and weekly jobless claims - due later on Thursday and likely to reflect slumping business investment and rising unemployment - for further clues on the state of the world's largest economy and top oil consumer.
US crude for April delivery was up 25 cents to $42.75 a barrel by 06.20 UAE time, after rising $2.54 on Wednesday.
London Brent crude gained 26 cents to $44.55. Oil's gains were spurred by US Energy Information Administration data showing gasoline stocks fell 3.4 million barrels, against a forecast for just a 100,000- barrel draw.
"Inventories in the US have gone down for two weeks in a row – it looks like the worst is probably over as far as the US is concerned, but it's really the economy, the economy, the economy," said Anthony Nunan, risk management executive at Tokyo-based Mitsubishi Corp.
The data also showed a 1.7 percent rise in US gasoline demand over the four weeks ending Feb. 20, as low gasoline prices lured US motorists back on the roads.
This helped oil shrug off a drop in equities markets, with European shares hitting a new six-year low.
US stocks also fell after US President Barack Obama's first address to Congress shed little new light on how he plans to stabilise the economy and shore up banks.
Data showing sales of previously owned US homes plunged in January and prices hit a six-year low also weighed on shares.
Looking ahead, the US Labor Department will release jobless claims for the week ended Feb. 21, and the US Commerce Department will also unveil January durable goods orders, both at 05.30pm.
Oil has received support from reports earlier this week of high compliance by members of the Organization of the Petroleum Exporting Countries with deep production cuts agreed last year to stem the slide in oil.
Venezuelan Finance Minister Ali Rodriguez, a former president of PEC, aid the OPEC nation expected to propose new output cuts when the group next meets in March.
Global energy consumption has collapsed as the financial crisis has thrown most major economies into a recession, prompting oil prices to tumble nearly $110 since peaking in July.
"Oil has bounced off the lows of $32-$33 a couple of times, and with talk of more OPEC cuts in March, we're probably pretty close to the bottom - we should see the range of plus/minus $40 in the mid-term," Nunan added.
"But the caveat is that it all depends on the economy – whether Obama's package is able to put a floor to the slide in the broader economy." (Reuters)