By Santosh Menon
U.S. crude for March delivery was 7 cents down at $87.07 a barrel by 10:45 a.m. EST, rallying from lows of $86.24 as on the back of recovering stock markets. Oil had fallen by $2.88 in the last two sessions.
Oil has also been supported by production shutdowns in the North Sea and in Nigeria, but stock market movements, particularly the U.S. market, set its trading direction on Thursday.
Analysts said the data was the latest in a steady stream of bad news on the U.S. economy despite aggressive interest rate cuts by the Federal Reserve to ward off a recession.
Oil prices have tumbled from their January record above $100 on mounting concerns of the U.S. recession, and traders said the market appeared to disregard bullish news.
"At the end of last year, if you had news like this, it (oil) would be hitting new highs. Now every time there is a rally, it seems to get sold into. I think funds are continuing to liquidate their positions," said Christopher Bellew at Bache Commodities.
The National Weather Service eight to 14-day outlook released on Wednesday predicted normal or below normal temperatures for the northern half of the United States, with above seasonal readings expected for the rest of the country.
The poll of 20 analysts forecast average world oil demand growth this year at 1.43 million bpd, down from 1.56 million bpd in a similar poll last August and well short of International Energy Agency's forecast of 1.98 million bpd.
