Oil rises slightly after sharp drop overnight

Light, sweet crude for February delivery was up 73 cents to $42.40 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract overnight fell $2.94 to settle at $41.67.

The January contract, which expires on Friday, fell $3.84 overnight to settle at $36.22 after dropping as low as $35.98, levels last seen in June 2004.

Investors have been discouraged by a stream of dismal economic news, highlighted by a string of company layoffs.

Bristol-Myers Squibb Co., International Paper Co., Bank of America Corp. Western Digital Corp., Aetna Inc., and Newell Rubbermaid Inc., all announced mass job cuts in the past week.

The Dow Jones industrial average fell 2.5 percent Thursday.

"Every time you see the news--about China, the U.S., Europe--it's negative," said Clarence Chu, a trader with market-maker Hudson Capital Energy in Singapore.

JPMorgan on Thursday cut its 2009 price target for oil to $43 a barrel from $69.

Earlier this week, the 13-nation Organization of Petroleum Exporting Countries reduced its output quota by 2.2 million barrels a day in a bid to bolster prices that have slid about 71 percent since July.

But prices fell after the Wednesday announcement, largely because investors had already anticipated a cut of that size by OPEC.