* U.S. December durable goods orders likely to be weak
* Q4 GDP data to show economy at its weakest in 26 years
* Deeper U.S. refinery run cuts may offer support
(Adds analyst quotes, Nippon Oil, updates prices)
By Jennifer Tan
SINGAPORE, Jan 29 (Reuters) - Oil slid below $42 a barrel
on Thursday, as fears over faltering demand in the global
economy outweighed U.S. data showing falling gasoline and
distillate stocks in the world's top energy consumer.
Traders 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 U.S. economy.
U.S. crude <CLc1> fell 53 cents a barrel to $41.63 by 0627
GMT, while London Brent crude <LCOc1> lost 68 cents to $44.22.
Crude prices plunged 9 percent earlier this week on fresh
signs that the United States was still deeply mired in
recession.
"The market is going to drift lower in the days ahead -- we
will probably test the lows of between $35 and $39, but it
should not go much lower than that -- the bottom is being put
in," said Mark Waggoner, president of Excel Futures in
California.
Oil prices rebounded on Wednesday after data released by
the U.S. Energy Information Administration showed a 1
million-barrel draw in distillate stocks last week as cold
weather hit the U.S. Northeast, the world's top heating oil
market, and a surprise 100,000-barrel fall in gasoline
supplies. []
Crude also got a boost from remarks by OPEC Secretary
General Abdullah al-Badri at the World Economic Forum in Davos,
Switzerland, that an oil price of $50 a barrel was too low to
encourage investment in new supply and the cartel would fully
enforce supply curbs by the end of this month. []
But jitters over the data release later in the day, likely
to give a grim reading of the U.S. economy, weighed on market
sentiment and sparked an early bout of selling.
Durable goods orders, due at 1330 GMT, are estimated to
have fallen 2.0 percent in December after a 1.5 percent decline
in November, economists polled by Reuters said.
U.S. 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 trained on the government's first snapshot
of the U.S. 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.
[]
RUN CUTS
The dismal forecast comes atop the International Monetary
Fund's forecast on Wednesday that world economic growth this
year will fall to its slowest since World War Two.
[]
In Asia, Japan's Nippon Oil Corp <5001.T> said it expected
February crude refining volumes to fall 12 percent from a year
ago as domestic demand declines. []
"There remains, we think, a high probability of another
material downturn in oil prices once seasonal demand begins to
ebb," said UBS Investment Research economist Jan Stuart.
On the supply front, price support for oil is likely to
come from expanding U.S. refinery run cuts, which will reduce
fuel supply, analysts said.
U.S. refiners are likely to take more processing units down
for longer periods during spring maintenance as prolonged
economic weakness crimps demand for fuel.
"Crude stockpiles will continue to build, but distillates
and gasoline will leave the market this year as refineries
remain down for longer periods -- prices will start going
higher, and will eventually lead the market higher as we get
into the summer," Waggoner said.
OPEC's supply cuts since second-half 2008, in reaction to
the fall of more than $100 in oil prices since July, have also
offered a boost.
Kuwait said on Tuesday it would support a further
production cut if needed, echoing comments by some other OPEC
members, while smallest member Ecuador said it would comply
with the production cuts agreed by the cartel. []
[]
OPEC next meets on March 15 to decide output policy.
Martin King, analyst with FirstEnergy Capital Corp,
believes OPEC has done a much better job of cutting supplies
from the market than many have 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."
(Editing by Ramthan Hussain)
(jennifer.tan@thomsonreuters.com; +65-6417 4679; Reuters
Messaging: jennifer.tan.reuters.com@reuters.net)
