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U.S. oil futures fell to a three-week low below $35 a barrel on Thursday, dragged down by an overhang of crude oil stocks in the United States and concerns over the health of the global economy. U.S. crude for March delivery dropped $1.30 to $34.64 a barrel by 1:40 p.m. EST, while Brent crude rose 22 cents to $44.50 a barrel. U.S. crude has been running at a big discount to Brent due to a supply glut at the main U.S. storage hub in Oklahoma. The losses came after the U.S. government reported Wednesday a seventh straight weekly increase in nationwide crude inventories as the economic crisis crushes business and consumer fuel demand. Crude oil stockpiles at Cushing, Oklahoma -- the world's biggest storage hub and the delivery point for U.S. crude futures -- rose last week to record levels around 35 million barrels, near operational capacity. Encouraging losses Thursday, the U.S. Labor Department said the number of people staying on unemployment benefits rose by 11,000 to a record 4.810 million in the last week of January. "What that's telling us is the underlying trend is bad and seems to be getting worse. For job losses, February could be worse than January," Nigel Gault, chief U.S. economist at Global Insight in Lexington, Massachusetts, said. The global economic downturn is taking its toll on oil consumption and supply appears to be outpacing demand in many parts of the world, despite production cuts by members of the Organization of the Petroleum Exporting Countries. Oil prices have tumbled more than 10 percent this week, extending more than $100 worth of losses since July's record. Traders said the short-term direction of the market was being dominated by movements in stock markets, which were lower in New York on Thursday. Oil's losses were further exacerbated by a report Wednesday from the International Energy Agency forecasting global demand would shrink this year by the largest amount since 1982. Brent crude was supported somewhat by news of supply problems in Nigeria.
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