The contract fell $1.00 on Friday to $40.17 a barrel after the Labor Department said the U.S. lost 598,000 jobs in January and the unemployment rate rose to 7.6 percent, the highest since 1992.
For all of 2008, the economy lost a net total of 2.9 million jobs, according to revised figures, marking the biggest annual loss on record.
"Considering the staggering magnitude of the jobs data, oil held up quite well," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. "The downward momentum in oil pricing appears to have been broken as the $40 level has proven to be a very strong support level."
Investors will be watching as a huge stimulus bill makes its way through the U.S. legislature this week. A $827 billion rescue package for the economy will likely pass the Senate by Tuesday, though it will have to be reconciled with slightly different version the House of Representatives approved earlier.
The Treasury Department delayed the unveiling of a new bailout framework for financial institutions from Monday to Tuesday to let the administration focus on the Senate legislation.
The department is considering steps to broaden the use of a new lending facility at the Federal Reserve, provide government guarantees to help banks deal with their troubled assets, and continue direct infusions of capital into banks in exchange for securities and tougher accountability rules.
So-called toxic assets - securities for which markets have dried up, making them impossible to value - have been weighing on banks' balance sheets, preventing them from lending to the wider economy and stifling economic recovery. Experts hope the Treasury's plan to manage these bad assets would brighten the outlook for the U.S., the world's largest oil consumer.
"The U.S. stimulus plan and the bank rescue plan are supporting oil," Shum said.
Evidence that OPEC has followed through with output reductions has also helped keep oil above $40. The Organization of Petroleum Exporting Countries has promised to cut 4.2 million barrels of its production since September.
"OPEC's compliance with production cuts has held up well, and they appear prepared to make further cuts if prices drop," Shum said.
Analysts at JBC Energy said recent OPEC statements "provided some bullish sentiment" and suggest "the group is prepared to cut further at its next meeting in March if necessary."
In other Nymex trading, gasoline futures were unchanged at $1.25 a gallon. Heating oil fell 0.30 cent to $1.36 a gallon, while natural gas for March delivery dropped 8.6 cents to $4.69 per 1,000 cubic feet.
In London, the March Brent contract rose 34 cents to $46.55 on the ICE Futures exchange.
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Associated Press Writer Alex Kennedy in Singapore contributed to this report.
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