Oil rose back above $34 a barrel Friday in Asia after concerns about weakening U.S. consumer demand sent crude near five-year lows overnight, AP reported.
Light, sweet crude for March delivery rose 41 cents to $34.39 a barrel by afternoon in Singapore on the New York Mercantile Exchange . The contract fell $1.96 overnight to settle at $33.98 a barrel.
Crude fell to a five-year low at $33.20 a barrel in December from a record $147.27 in July. In each of the last three days, prices have risen slightly in Asia only to end up dropping about $2 in U.S. trading.
Investors are worried that the worst U.S. recession in decades could be deepening, and taking demand for crude down with it. Job losses are a particular concern as unemployment drags on consumer spending.
The number of Americans requesting first-time unemployment benefits remained near a 26-year high last week, the Commerce Department said Thursday. The number of initial jobless benefit claims were a seasonally adjusted 623,000, little changed from 631,000 the previous week, which was the highest number since October 1982.
The number of people claiming benefits for more than one week rose to 4.81 million two weeks ago from 4.78 million the previous week, the highest total since records began in 1967.
"The economic indicators in the develeped world remain weak and that's impinging on oil demand," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "It's premature to say the fall in demand has bottomed."
U.S. oil storage sites, including the main depot in Cushing, Oklahoma, are brimming with crude, reflecting the drop-off in demand. Producers who might otherwise store their crude are dumping it onto the market, pushing the price down.
"The March contract price has been distorted somewhat by the build-up in Cushing," Moore said.
Contracts for later in the year show higher prices, reflecting investor expectations of a recovery in demand and supply cuts led by the Organization of Petroleum Exporting Countries . The April contract is trading at $42.14 a barrel and the June contract is at $47.62.
A $789 billion stimulus bill, which President Barack Obama could sign within days, will likely take months to impact consumer spending, and investors worry it may not spark a sustainable recovery.
"At this point, it's been fully priced in," Moore said.
The collapse in crude prices threatens to make some higher-cost fields unprofitable, which could lead producers to curtail output.
"We're at the point where you start to see marginal producers have to shut down production," said Peter Elston, a strategist with fund manager Aberdeen in Singapore. "That gives you quite a good support level for prices."
In other Nymex trading, gasoline futures were steady at $1.26 a gallon. Heating oil gained 1.02 cents to $1.33 a gallon, while natural gas for March delivery rose 1.5 cents to $4.50 per 1,000 cubic feet.
In London, the March Brent contract rose $1.22 to $45.87 on the ICE Futures exchange.