Oil dips to $40 a barrel

Oil slipped towards $40 a barrel Friday as the weakening economic outlook overshadowed OPEC's attempts to curb crude supplies and boost prices.

U.S. light crude for March delivery fell $1.01 to $40.16 a barrel by 5:52 a.m. ET.

Inventories in Cushing, Okla.-- the delivery point for the U.S. light crude contract -- are at record levels. U.S. light crude for delivery in two months time is trading above $45 a barrel.

The global economic slowdown has curbed demand for fuel around the world, knocking oil prices sharply lower since they peaked at almost $150 in July.

U.S. non-farm payroll numbers due later Friday are expected to add to the gloom, after data released the previous day showed applications for U.S. jobless benefits hit a 26-year high while German manufacturing suffered its largest fall since 1990.

Oil prices could stay as low as $40 a barrel for the rest of 2009, the head of Italy's largest oil company said Friday.

"A price of $40 a barrel, it's roughly my forecast for this year," Eni SpA Chief Executive Paolo Scaroni said during an address at a Confindustria conference.

The Organization of the Petroleum Exporting Countries has been cutting oil output in a bid to boost prices. OPEC sources have indicated the group could cut a further 1 million barrels per day (bpd) from output quotas when it next meets in March.

OPEC has already cut member production quotas by 4.2 million bpd since September, but oil tanker tracking firms have said the group has yet to successfully implement all of its cuts.

"OPEC's compliance has been impressive even if they've still got some way to go," Julian Keites at Newedge in London said.

"These are significant output cuts and if they can implement more then we should see global stock cover start to come down. Until then prices seem well supported above $40 a barrel by the cuts so far."

Democrats in the Senate on Thursday pushed towards passage of a huge economic stimulus package despite scant Republican support, hoping to boost the U.S. economy, which could help stem a decline in fuel demand.