Oil held above $36 a barrel today, pausing after steep overnight losses, as lingering worries over the health of the global economy and forecasts for a hefty fall in global energy demand weighed on sentiment.
Markets were cheered after the US Congress reached a deal on $789 billion in new spending and tax cuts yesterday, but investors remained sceptical towards a separate US bank rescue plan unveiled on Tuesday that was lacking in specifics.
Investors will now train their eyes on US weekly jobless claims and January retail sales data due later in the day, which will give a clearer indication of how the U.S. economy is faring.
US light crude for March delivery edged up 23 cents to $36.17 a barrel by 2.47am. The contract settled down $1.61, or 4.3 per cent, yesterday.
"The deterioration in US demand drove crude oil inventories higher by more than expected ... short-term risks to oil prices remain on the downside," Goldman Sachs' commodities analyst Malcolm Southwood said in a note.
Oil has tumbled around 10 per cent this week, having fallen four sessions in a row since last Friday, on demand worries and fears the US bank rescue plan would not go far enough to revive the ailing financial sector.
Oil prices took a battering yesterday after the US Energy Information Administration said that domestic crude stocks had ballooned 4.7 million barrels to 350.8 million barrels in the week to February 6th, against a forecast for a 3.1 million barrel rise.
The latest increase in US crude stocks comes on the heels of a combined rise of over 13 million barrels in the prior two weeks, and crude inventories are now moving significantly above their five-year range, BNP Paribas said in a report.
Reuters