ON (AFP) - Oil prices held firm in London on Tuesday after slumping a day earlier on worries about tumbling energy demand in the United States amid fresh financial turmoil.
Brent North Sea crude for delivery in April gained 29 cents to 42.50 dollars a barrel in late afternoon London trade. New York's main futures contract, light sweet crude for April, eased seven cents to 40.08 dollars. "Crude oil is trading near the 40 dollars a barrel level as traders are losing faith in the possibility that the US economy will rebound this year," said David Evans, analyst at BetOnMarkets.com. "Oil prices are expected to be very volatile this week especially towards the end of the week when the (US) employment data will be released."
Prices shed more than four dollars on Monday as the market reacted to weak economic data in the United States, the world's biggest energy consumer, and also to dire earnings news from major financial groups.
The sharp contraction in the US economy and high jobless claims "are at the core of the economic woes and the ultimate drag on energy prices," said Phil Flynn, vice president of Alaron Trading Corporation.
The US government announced on Friday that GDP shrank a worse-than-expected 6.2 percent in the fourth quarter of 2008.
Investors were also spooked by the US government's latest massive bailout package for insurance giant AIG worth 30 billion dollars after it posted a 61.7-billion-dollar quarterly loss, the biggest in US corporate history.
"The financial situation, weak manufacturing, weak employment - recession pressures oil prices and that's the major concern," said James Williams, an economist at WTRG Economy.
Oil prices had risen overall last week in anticipation of increasing demand for motor fuel in the United States and indications of output cuts by the Organization of the Petroleum Exporting Countries, traders said.
OPEC, which pumps about 40 percent of the world's oil, in late 2008 announced output cuts of 4.2 million barrels per day in a bid to reverse tumbling prices.
Elsewhere in the market, an oil pipeline operated by the Royal-Dutch energy giant Shell that feeds into the key Escravos export terminal in southern Nigeria has exploded, curtailing production, a company spokesman said Tuesday.
"A 24-inch trunkline exploded over the weekend," Shell spokesman in Nigeria Tony Okonedo told AFP, refusing to speculate on the causes or extent of the damage.
Shell has been a regular target of attacks by militants in southern Nigeria over the past three years, forcing it to shut down some facilities and several times defer contractual obligations to clients.