* Saudi to deepen output cuts in Feb to Asian buyers
* Friday's U.S. Dec jobs data likely to reinforce gloom
* Hopes over Obama stimulus package may offer price
support
(Recasts lead to include Saudi cuts, updates prices)
By Jennifer Tan
SINGAPORE, Jan 9 (Reuters) - Oil rebounded above $42 on
Friday amid signs Saudi Arabia would deepen supply cuts next
month, after sinking 2 percent overnight on signs of worsening
demand from the United States, the world's top energy
consumer.
U.S. crude for February delivery <CLc1> rose 85 cents to
$42.55 a barrel by 0356 GMT, after sinking 2.2 percent to
settle at $41.70 on Thursday. London Brent crude <LCOc1>
climbed 88 cents to $45.55.
The decline followed Wednesday's 12 percent fall, the
biggest daily percentage drop in the price of crude in more
than seven years.
Underpinning oil prices is mounting evidence that OPEC
members are implementing the group's biggest-ever output cuts.
Top crude exporter Saudi Arabia will deepen its supply cuts
in February from January to at least three Asian crude buyers,
industry sources said on Friday, signalling it is cutting
output more to support oil prices. []
Earlier this week, Kuwait and Iran also told customers of
bigger supply curbs this month in a bid to prop up prices.
[] The producer cartel has cut output three times
since September.
The market will scrutinise the Labor Department's December
non-farm payroll and unemployment data due later on Friday,
which will likely be dismal, for further clues on future
demand.
"At the $40-$42 level, oil is seen as undervalued, so
people are now buying back," said Tetsu Emori, a fund manager
with Astmax Co Ltd in Tokyo.
"In the short term, weak demand in the U.S. has already
been priced in. A lot of people have already sold their long
positions, and are looking to buy on dips."
STIMULUS HOPES AMID WEAK DATA
Still, weaker-than-expected sales from retail giant
Wal-Mart overnight and a surge in weekly U.S. jobless benefit
rolls to a 26-year high reignited fears of flagging demand,
offsetting earlier support from escalating tensions in the
Middle East and widening supply disruptions from the
Russia-Ukraine gas row.
U.S. jobs data due at 1330 GMT on Friday is likely to show
the economy probably lost more than half a million workers last
month, pushing the unemployment rate up to a 15-year high of
7.0 percent. []
Economists polled by Reuters expect non-farm payrolls to
register a drop of 550,000 jobs for December, which would make
it the worst single month of job losses in 34 years.
Oil has fallen more than $100 from a record peak of over
$147 a barrel in July, as the global economic downturn hits
demand for fuel. It settled at $33.87 a barrel on Dec. 19, the
lowest level since Feb. 10, 2004.
President-elect Barack Obama, who takes office on Jan. 20,
has urged U.S. lawmakers to work day and night to pass a
massive proposed stimulus package of tax cuts and public-works
spending likely to cost $800 billion or more. []
"People are hoping to see some recovery from the Obama
stimulus package, and those hopes are supporting the market to
some extent," Emori added.
Russia has agreed on the deployment of monitors to oversee
gas supplies to the European Union via Ukraine, clearing the
way for the resumption of gas supplies, the Czech EU presidency
said in a statement on Thursday. []
The U.N. Security Council passed a resolution on Thursday
calling for an immediate ceasefire in Gaza and Israel's full
withdrawal after a 13-day offensive. The United States
abstained in the vote.
While the conflict does not directly threaten oil supplies,
Middle East unrest can bolster prices because countries in the
region pump about a third of the world's oil.
(Editing by Ramthan Hussain)
(jennifer.tan@thomsonreuters.com; +65-6417 4679; Reuters
Messaging: jennifer.tan.reuters.com@reuters.net)
