Oil fell on Thursday, dragged down from six-month highs as signs of job market weakness stoked concerns about the economy.
U.S. crude settled 99 cents lower at $61.05 a barrel after hitting a six-month high over $62 on Wednesday. London Brent fell 66 cents to settle at $59.93 a barrel.
The petroleum markets are lower on profit-taking ... as traders take note of a downturn in the equity markets that erodes faith in the hopes of a V-shaped economic recovery, said Tim Evans, analyst for Citi Futures Perspective in New York City.
U.S. stocks slid after a disappointing Fed regional survey and government unemployment data showed so-called continued claims rose to a fresh record while new jobless claims fell. <.N>
Manufacturing in the U.S. mid-Atlantic region contracted for the eighth consecutive month, according to a Federal Reserve survey.
The economic data came one day after the U.S. Federal Reserve offered a more pessimistic view for economic recovery, deflating some of the optimism that had underpinned the stock market's recent rally from 12-year lows in early March.
Oil prices jumped by about a third over the past four weeks as signs of a potential economic rebound outweighed weak demand and high inventories.
A JP Morgan research note forecast the economy would begin to turn around in the second half, leading the bank to hike its price forecasts for 2009 and 2010.
While it may seem at odds with recent demand data and high levels of global inventories, we believe the economic outlook is improving and a second-half recovery, perhaps more vigorous than even we foresee, is on the cards, the bank said.
Oil got a lift on Wednesday after weekly U.S. government inventory data showed a steep drop in crude and gasoline stockpiles ahead of the U.S. Memorial Day weekend, traditionally the start of the summer driving season.
Slumping demand has sent crude tumbling from record highs near $150 a barrel set last July, prompting the Organization of the Petroleum Exporting Countries to agree a series of output cuts since September.
A senior Gulf OPEC delegate told Reuters the cartel was likely to keep output targets steady at its next meeting on May 28.
Eleven out of 12 oil analysts and economists surveyed by Reuters also predicted OPEC would maintain output.
Nigeria's army declared a militant leader is wanted dead or alive and pressed on with an offensive in the Niger Delta which Amnesty International said may have killed hundreds in the OPEC nation.
The military last week launched its biggest campaign for years in the country's oil heartland, bombarding militant camps near the town of Warri from the air and sea before sending in hundreds of troops to flush rebels out of communities.
(Additional reporting by Robert Gibbons and Gene Ramos in New York and Jane Merriman in London; Editing by Christian Wiessner)