Oil edged above $41 a barrel on Wednesday, as further evidence emerged of a deepening global slowdown that is crushing demand for fuel.

U.S. light crude for March delivery rose 77 cents to $41.61 a barrel by 1300 GMT on its first day as the new front month contract.

The February contract, which expired on Tuesday, settled up $2.23, or about 6 percent, at $38.74 a barrel, on short-covering.

London Brent crude rose 23 cents to $44.85 a barrel.

“We’re consolidating a little bit after yesterday’s late bounce on the February contract expiry,” said Andrey Kryuchenkov, vice president commodities research at VTB Capital in London.

“Sentiment continues to be very bearish as strong demand just doesn’t look like emerging in the current climate.”

The International Monetary Fund is set to sharply cut growth forecasts this month and the world will not return to strong growth for two to three years, IMF Managing-Director Dominique Strauss-Kahn said on Wednesday.

FALLING DEMAND

The International Energy Agency (IEA), a leading energy watchdog, last week joined the ranks of forecasters predicting a fall in global oil demand this year in light of the slowing economic outlook. The IEA sees demand falling by 500,000 barrels per day (bpd) in 2009 to 85.3 million bpd.

Oil has plunged from record highs above $147 a barrel in July as oil consumption has dropped, prompting the Organization of Petroleum Exporting Countries (OPEC) to agree to a series of output cuts.

OPEC is fully enforcing its deepest ever oil supply curbs, which should be enough to boost prices, the group’s president, Angolan oil minister Botelho de Vasconcelos, told Reuters on Tuesday.

But prices remain at levels not seen since 2004.

China, one engine in the six-year commodity price rally that started in 2002, was expected to release fourth-quarter GDP data this week that economists say will show 7.0 percent growth, the slowest pace of expansion in nearly a decade for the world’s third-biggest economy.

A Reuters poll of analysts forecast that crude oil stocks in the United States, the world’s biggest energy consumer, rose by 1.4 million barrels last week, with distillate stocks seen down 1.4 million barrels due to cold winter weather.

Gasoline stocks are expected to be up 2.1 million barrels, up 5.1 million barrels from a year ago.

Data will be released on Thursday, a day later than usual, following the U.S. holiday on Monday honoring civil rights leader Martin Luther King Jr.

LONDON, Jan 21 (Reuters)