Oil steadies above $36 after 4-year low

By Annika Breidthardt

SINGAPORE (Reuters) - Oil regained some ground above $36 on Friday, after falling more than 20 percent this week as OPEC's record supply failed to build a floor under prices and instead was viewed as a sign of a worsening demand slump.

Oil, which fell to its lowest since June 2004 on Thursday, is now more than $110 off its July peak, having shed a third of its value just this month as a global recession cuts into fuel use. It was set for its second biggest weekly decline since 2003.

U.S. light crude for January delivery, which expires later on Friday, rose 58 cents to $36.80 a barrel at 6:06 a.m. British time, after falling on Thursday to $35.98.

Months further out along the curve have dropped less than the front-month contract, with crude for February delivery 77 cents higher at $42.44, an almost $6 contango that is the highest on record.

London Brent crude for February delivery was 44 cents higher at $43.80 a barrel.

"Until traders see a sustained drop-off in the rate of demand destruction, the market will have a hard time establishing a floor. We expect the market to level off in the high 20's before beginning a push back towards $50, sometime in the late second, early third quarter," said Jonathan Kornafel, Asia Director of Hudson Capital Energy.

"From a credibility standpoint, OPEC has no choice but to bite the bullet for the next few months."

Asian refiners had still received no notices from OPEC producers of any potential allocation cuts for January, but said they still expected to receive them even though time was running out to influence vessel nominations for the month.