Oil hovered above $61 a barrel on Friday, off six-month highs the previous day, as disappointing jobs and factory data dented hopes that the economy of the United States, the world's top energy user, was set for a quick rebound.
U.S. data on Thursday signaled that the road to recovery for the economy would be long and bumpy, after a key manufacturing index showed only marginally less weakness and unemployment looked set to hit double-digit levels.
Sentiment was further pummeled by fears that the United States could lose its coveted triple-A credit rating.
U.S. crude for July delivery was up 40 cents at $61.45 a barrel by 2:30 a.m. EDT, after falling 1.6 percent to settle at $61.05 on Thursday. In post-settlement trade on Thursday, it hit a six-month high of $62.26, and is up about 9 percent so far this week.
London Brent was up 44 cents at $60.37.
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I think the market has got ahead of itself -- we've talked about 'green shoots' of recovery in the economy, but the reality is that it's going to take time to get traction, said Peter McGuire, Managing Director of Commodity Warrants Australia.
Crude has risen about 85 percent in the last three months, and it's not likely to go much further in this economic climate -- we're probably going to see a $55 to $65 range over the next couple of weeks, he added.
The Philadelphia Fed's closely watched indicator of factory activity in the Mid-Atlantic region rose by a fraction in May, with contraction more than markets had expected.
The U.S. Labor Department also reported that initial jobless claims last week fell for the third time in four weeks, but continuing claims hit a 16th consecutive record high.
The reports come a day after the Federal Reserve, in minutes released from its April policy meeting, said a full U.S. recovery could take five or six years.
Ratings agency Standard & Poor's warning that it could cut its top AAA credit rating on the UK also stoked worries the United States could face a similar fate.
OPEC OUTPUT SEEN STEADY
U.S. stocks saw a broad sell-off on Thursday, and the dollar hit a two-month low against the yen on Friday, as investors concerned about the U.S. budget deficit, exited dollar-denominated assets.
Oil has been on an upward trend since mid-April in an equity-led rally. Prices have recovered from below $33 in December after a plunge from record highs above $147 in July.
It hit a six-month peak 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.
Some price support came from data showing China's apparent oil demand rose by 3.9 percent in April from a year earlier, its first significant rise since October last year.
Oil demand in China -- the world's second-largest energy consumer -- has fallen in four of the last five months, and by as much as 8.9 percent in January.
On the supply front, the Organization of Petroleum Exporting Countries, which has agreed to cut 4.2 million barrels per day of output since September to prop up prices, will meet again on May 28 to decide on supply.
But the producer cartel is likely to keep output targets steady as stronger oil demand in coming months may cut brimming inventories, a senior Gulf OPEC delegate told Reuters.
Eleven of 12 oil analysts and economists surveyed by Reuters also saw OPEC maintaining its output target.
Unrest in OPEC member Nigeria, Africa's top oil and gas exporter, could underpin prices, although Minister of State for Petroleum Odein Ajumogobia told Reuters the country's oil output was still broadly unchanged at around 1.6 million barrels per day (bpd).
(Editing by Clarence Fernandez)