US oil rises above $34 per barrel

US oil prices rose above $34 a barrel on Friday, snapping a five-day losing streak, as a late rally in US stocks on news that the US government was working on a mortgage plan for troubled homeowners helped lift sentiment.

But lingering worries that the global economic downturn is taking its toll on oil consumption limited oil's gains.

US crude for March delivery rose 51 cents or 1.5 per cent to $34.49 a barrel, after falling $1.96 in the previous session to settle at $33.98 a barrel, the lowest since Dec. 19.

London Brent crude dipped 4 cents to $45.99 a barrel, extending a rare premium over US crude to more than $11, because of a glut at the main US storage hub in Oklahoma and supply problems in Nigeria that tend to have a bigger impact on European supplies.

"The US stimulus plans may be helping to boost market sentiment but the movement in oil prices this morning is still relatively moderate," said David Moore, a commodities analyst at the Commonwealth Bank of Australia.

US oil prices have lost about 14 per cent this week and are languishing at a three-week low, pressured by persistent demand worries and doubts over the efficacy of the US government's banks rescue plan.

Oil's losses on Thursday were exacerbated by news that the number of people staying on unemployment benefits in the United States rose by 11,000 to a record 4.810 million in the last week of January.

"Concerns about consumption weakness and the build-up in crude stocks in Cushing will continue to weigh on markets," Moore said.

In the short term, analysts believe the market's direction would be influenced by movements in stock markets.

News that the Obama administration was working on a programme to subsidise mortgage payments for troubled homeowners renewed hopes the host of measures could pull the world's largest economy out of its steep tailspin, sparking a late US stocks rally.

Asian stocks excluding Japan rose 1.6 per cent on Friday, with the Nikkei up 2 per cent and Australia's resources-laden index gaining 1 per cent.

Investors have their eyes peeled on developments in the United States, as Democratic leaders in the US Senate and House of Representatives wrapped up a last minute tax cut and spending details in the economic stimulus bill, setting votes for Friday by both chambers.

Algerian Oil Minister Chakib Khelil said on Thursday that there was a 50 per cent chance the cartel could agree to deepen cuts when it meets in March, and said that compliance among members was solid.

"We have 85 per cent which is unusual for compliance. By meeting time, we will probably have 100 per cent," Khelil said.