* Traders settling positions head of long holiday break
* U.S. GDP data on Tuesday likely to point to weaker demand
* UK economy shrinks 0.6 pct in Q3, worse than expected
* U.S. oil inventory rise expected in data due on Wednesday
(Updates prices, detail)
By Christopher Johnson
LONDON, Dec 23 (Reuters) - Oil prices crept above $40 a
barrel on Tuesday, supported by short-covering and book-squaring
ahead of key U.S. economic data.
Final third-quarter U.S. gross domestic product data due
later on Tuesday is likely to underscore the ailing economy as a
series of stimulus measures and policy moves -- including
China's fifth interest rate cut -- fail to halt a slide towards
the worst recession in decades.
The UK economy shrank for the first time since the early
1990s in the third quarter and by more than expected, data
showed on Tuesday, with gross domestic product contracting 0.6
percent. []
But crude prices have fallen sharply in recent days and
several traders were squaring positions ahead of the holiday
break. Volume was thin as traders sought to close out the
worst-ever year for oil futures, which are now down almost 60
percent since January.
U.S. crude for February delivery <CLc1> rose 11 cents to
$40.02 a barrel by 1244 GMT after falling 6 percent on Monday.
ICE Brent <LCOc1> rose 20 cents to $41.65 a barrel.
The underlying tone was set by U.S. stocks, which fell on
Monday, reinforcing negative sentiment across other financial
markets. []
"The bears appear to be in control, aided by weak equity
markets as the global economic slump offers a depressive ring to
the festive period," said Rob Laughlin, senior oil analyst at MF
Global in London.
The most dramatic decline ever in Japanese exports has
increased anxiety about the condition of the world economy.
OPEC
Signs that oil demand is likely to contract for the first
time in a quarter century have already knocked oil prices over
$100 off their July peaks.
The Organization of the Petroleum Exporting Countries has
cut about 5 percent of world supplies to counter the collapse in
demand, last week agreeing an unprecedented 2.2 million barrels
per day reduction and appears ready to do more if needed.
But oil traders believe that some of the output cuts
promised by OPEC will not materialise and are looking for
evidence of improved compliance with the existing curbs.
While Saudi Arabia cut output more before OPEC's meeting two
weeks ago, other major members have yet to show their hand.
Sources with several Asian refiners said on Tuesday that they
had not received any new notices as yet.
Surging demand from China and other emerging nations sent
crude on a six-year rally to record highs over $147 a barrel in
July before the economic crisis began to slow demand in top
consumer the United States and big economies.
Now even the dynamic Asian economies appear to be suffering.
Apparent oil consumption in China fell by 3.2 percent in
November from a year ago, the first decline in nearly three
years, Reuters calculations confirmed this week, while crude
imports into the world's No. 2 energy consumer dropped to the
lowest level this year. []
Later on Tuesday traders will be looking for confirmation
the U.S. economy contracted by 0.5 percent in the third quarter,
in line with preliminary data. <ECONG7>
On Wednesday, weekly U.S. oil inventory data is expected to
show crude stocks rose by 300,000 barrels in the week to Dec.
19, with distillate and gasoline stocks also expected to have
gained, according to an early Reuters poll of analysts. []
(Additional reporting by Jonathan Leff in Singapore, editing by
Anthony Barker)
