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NEW YORK: Oil prices fell on Thursday amid concerns over a US stockpile build-up and worries that the global economic slump will further dampen demand.
The benchmark contract, light sweet crude for February delivery, fell 93 cents to close at 41.70 dollars on the New York Mercantile Exchange.
In London, Brent North Sea crude for delivery in February dropped 1.19 dollars to 44.67 dollars a barrel on the InterContinental Exchange.
The market remain gripped over the Israel-Hamas war in Gaza and potential effects on Middle East oil supplies, causing oil prices to be up briefly in European and Asian trading hours Thursday.
Western and Arab nations agreed on a compromise draft resolution calling for an immediate ceasefire and decided to put it to a UN Security Council vote.
But prices retreated again as concerns mounted over the US economic slump and oil stockpile build-up.
The US Department of Energy said on Wednesday that stockpiles of crude increased by 6.7 million barrels last week, far higher than predictions from analysts for a gain totalling only 700,000 barrels.
News on the build-up in recession-struck United States, the world's biggest crude consuming nation, pushed New York crude down by 5.95 dollars and London Brent oil by 4.67 dollars on Wednesday.
"The only thing that can drive oil higher in the short term is geopolitical news because we are loaded with crude," said Phil Flynn of Alaron Trading.
"The 6.7 million barrels in crude show supplies of crude are reaching glut-like proportions," he said.
The market also remain concerned over higher US jobless numbers and president-elect Barack Obama's mammoth task of stimulating growth.
A report on Wednesday said the US private sector lost 693,000 jobs in December, much higher than expected, indicating deepening recession.
The report came ahead of Friday's official US payrolls report, which some said could be even bleaker.
Mike Fitzpatrick at MF Global said investors were "stunned" by the bearish reading on private sector payrolls, "which was taken as a harbinger of Friday's Labour Department report."
Yet, despite the bearish US economic outlook, reports that there were rockets fired into Israel from Lebanon put brief pressure on prices.
Hezbollah denied it fired the salvo of rockets as the Lebanese government launched an inquiry amid heightened fears of a second front opening up in the Gaza war.
Israel said three rockets slammed into an area around the northern Israeli town of Nahariya, lightly wounding two people, and the army said it fired back at the launch site.
No group claimed responsibility for the attack although officials in both Lebanon and Israel said it could have been the work of a Palestinian faction.
Western and Arab foreign ministers meanwhile agreed on Thursday on a compromise draft resolution calling for an immediate Gaza ceasefire and decided to put it to a UN Security Council vote, a Palestinian diplomat said.
"There's an agreement accepting the amendments of the Arabs," Ryad Mansour, the Palestinian observer to the UN, told reporters in New York. - AFP/de
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