* Worsening global recession weighs on sentiment
* Market awaits weekly U.S. API, EIA inventory data
* U.S. economic data due this week to reinforce bleak
outlook
(Updates prices, adds quote)
By Jennifer Tan
SINGAPORE, March 3 (Reuters) - Oil hovered above $40 a
barrel on Tuesday, after slumping 10 percent overnight as the
deepening global recession threatened to crimp energy demand
further, outweighing OPEC's strong compliance with supply
curbs.
Global stocks plumbed multi-year lows on Monday, while the
dollar climbed to nearly three-year highs as a record quarterly
loss for U.S. insurer AIG heightened fears about the financial
sector and boosted the greenback's safe-haven status.
A slew of economic data, topped by February unemployment
and non-farm payroll data on Friday, will give further clues on
the state of the U.S. economy, while inventory figures on
Tuesday and Wednesday will show the impact on demand from the
world's top energy consumer.
U.S. crude <CLc1> was up 4 cents to $40.19 a barrel by 0655
GMT, after tumbling $4.61 overnight, while London Brent crude
<LCOc1> rose 5 cents to $42.26 a barrel.
"We will continue to be surprised on the bearish side by
the data that's coming out -- this keeps the demand
deterioration argument very much alive, and pushes the OPEC
production cuts to the backburner, precluding OPEC from
becoming a significant force in this market, " said Jim
Ritterbusch, president of Ritterbusch & Associates.
"We anticipate that oil has further to fall. We could see a
little support around $37, but it would be a surprise if the
market doesn't take out that level later this week."
The deepening of the 14-month economic slump was
underscored by a report on Monday that showed U.S. spending on
construction projects slumped to its lowest level in over four
years in January. []
U.S. stocks extended their sharp losses on Monday as
insurer American International Group <AIG.N>, which posted a
record $61.7 billion quarterly loss, was bailed out with
government money again, fueling fears that the global financial
crisis is worsening. []
The economic crisis has prompted some members of OPEC to
call for further output cuts when the group next meets on March
15.
Compliance with previous cuts has been strong, with OPEC
oil supply down in February for the sixth straight month,
although output remained above target levels, a Reuters survey
showed on Monday. []
Algerian Energy and Mines Minister Chakib Khelil said it
was quite possible OPEC would cut again. [] But
Iran's Oil Minister Gholamhossein Nozari said he did not expect
another reduction because the group's 80 percent commitment to
existing curbs had helped stem price falls. []
"OPEC will cut further but that will probably not be enough
to place a bottom in the market," Ritterbusch said, adding
that
any sustained upturn in oil prices is at least several months
away.
"We are still glued to the hip to the weakening equity
market. In the next couple of months, the equity market will
probably bottom out, and at the same time, with seasonal demand
for gasoline beginning to kick in, we could see an upward
movement that could accelerate in the second half."
U.S. crude oil inventories are expected to have risen by an
average of 900,000 barrels last week as imports rebounded, a
Reuters poll of analysts showed on Monday, ahead of weekly
inventory data from the API and the EIA. []
The survey also projected a fall in distillate and gasoline
stocks -- on average a 1.5 million-barrel drop in distillates,
which include heating oil and diesel, and an 800,000-barrel
decrease for gasoline.
Oil traders consider the API report to be less accurate
than the U.S. EIA data, which requires energy firms to respond
to their weekly survey.
(Editing by Ben Tan)
(jennifer.tan@thomsonreuters.com; +65-6417 4679; Reuters
Messaging: jennifer.tan.reuters.com@reuters.net)
