Oil Falls Toward $41 as US Supplies See Big Gain

Oil fell by more than $2 towards $41 a barrel on Thursday after a U.S. government report showed a much larger than expected jump in fuel stocks in the world's top energy user.

U.S. crude oil supplies rose by 6.1 million barrels last week, the U.S. Energy Information Administration said on Thursday. Gasoline stocks rose by a more than expected 6.5 million barrels.

U.S. light, sweet crude fell over $2, or roughly 5 percent, to near $41 a barrel. London Brent crude also traded lower.

Even before the U.S. inventory data, prices had weakened following another round of gloomy economic data.

The number of U.S. workers filing new claims for jobless benefits rose by more than expected last week, while housing starts and permits fell to a record low in December, data showed.

China's economy slowed sharply in the fourth quarter and Japan's central bank on Thursday predicted two years of deflation as Asia's largest economies buckle under the strain of the financial crisis.

European equities also pared early gains to turn negative, adding downward pressure to crude prices, traders said. Microsoft earnings missed expectations, contributing to losses for U.S. stocks.

Investors have been watching moves in equity markets to try to gauge the resilience of the broader economy, as the global economic slowdown has curbed demand for fuel around the world.

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