* U.S., European stock markets turn negative [] []
* U.S. government may take big stake in Citigroup <C.N>
* OPEC compliance close to highest ever
* Economic worries still dog markets
(Updates throughout)
LONDON, Feb 23 (Reuters) - Oil slipped below $40 a barrel on
Monday as the U.S. stock market retreated despite a report that
the U.S. government was in talks on increasing its stake in
Citigroup.
U.S. front-month crude <CLc1> fell 20 cents to $39.83 by
1540 GMT, off a session low of $39.53. The contract ended 15
cents lower at $40.03 on Friday.
London Brent crude <LCOc1> gained 30 cents to $42.19.
Oil had risen in early trade on Monday after a report in the
Wall Street Journal that the U.S. government could end up owning
as much as 40 percent of Citigroup. []
A source familiar with the situation told Reuters talks were
ongoing between Citigroup and regulators. Equities traders had
expected a full-scale nationalisation and the report helped to
boost shares in Asia and Europe.
But the U.S. stock market turned negative later and dealers
said the Citigroup story refocused attention on the U.S. banking
crisis and the deepening slump in the wider economy.
"The banking crisis is still at the core of the broad
recession," said Mike Wittner, analyst at Societe Generale.
More evidence emerged on Monday that the Organization of the
Petroleum Exporting Countries is strictly enforcing output cuts.
89 PERCENT COMPLIANCE
As the financial crisis has thrown major economies into
recession, global energy consumption has shrunk, prompting oil
prices to fall by more than $100 since last July's peak of
nearly $150.
In response, OPEC has already agreed on cuts totalling 4.2
million barrels per day (bpd) since last September and evidence
has mounted of a high level of compliance with the lower
production targets.
In February, OPEC oil supply was expected to drop sharply,
Petrologistics told Reuters on Monday. []
OPEC's 11 members with output targets were expected to pump
25.32 million bpd in February, down 980,000 bpd from January
levels and giving a compliance rate of 89 percent, according to
Reuters calculations, which would be one of the highest rates
yet.
"It's provisional because we're still in February," said
Wittner. "But that's mighty constructive."
The producer group is also very likely to decide on a new
production cut at its next meeting scheduled in March, Algerian
Energy and Mines Minister Chakib Khelil said at the weekend.
[]
Financial markets will be keeping an eye on Federal Reserve
Chairman Ben Bernanke's policy report to the U.S. Congress on
Tuesday and Wednesday. He is expected to offer assurances help
is on the way for the U.S. economy and may offer clues on
additional steps that could halt the economy's downward spiral.
[]
Gold <XAU=>, a safe-haven investment, eased on Monday, after
topping $1,000 an ounce last week.
(Reporting by Christopher Johnson and Barbara Lewis in London
and Fayen Wong in Perth; editing by James Jukwey)
