By Fayen Wong
Health of global economy, fuel demand still keeping crude price below $40 mark.
Oil steadied above $35 a barrel on Friday after a five percent fall overnight, with concerns about the health of the global economy and fuel demand keeping pressure on the market.
There was some relief that Bank of America Corp will receive $20 billion fresh cash from the US government and a guarantee for $118 billion of potential losses on toxic assets, but worries over credit losses at big banks continue.
U.S. light crude for February delivery was down 11 cents to $35.29 a barrel by 11.19am UAE time, after a $1.88 fall the previous session. The contract, which expires on Tuesday, touched a low of $33.20 on Thursday, the weakest in nearly a month.
London Brent crude for the new front-month March contract fell 34 cents to $47.34, maintaining an unusual premium to the U.S. benchmark due to the recent disruption of Russian gas supplies to Europe and growing U.S. stockpiles.
"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.
Oil has fallen about 13 percent so far this week, as a string of dismal figures from major economies stung investor confidence and portended further weakness in oil demand in months ahead.
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 in supply from the world market since September, could quickly deepen output cuts if needed, OPEC President Botelho de Vasconcelos said on Thursday.
Investors will be keenly watching US CPI data, due later on Friday, which is 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.
They are also nervously awaiting earnings results from Bank of America and Citigroup later on Friday, with both expected to post more losses.
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 by more than $110 since a record peak in July.
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. (Reuters)