Oil prices hovered near $40 a barrel Monday in Asia as investors weighed a deepening US recession against signs that OPEC production cuts are eroding supply.

Benchmark crude for April delivery rose 25 cents to $40.28 a barrel by midday in Singapore on the New York Mercantile Exchange. The contract fell 15 cents to settle at $40.03 on Friday.

The March contract expired Friday at $38.94 a barrel.

Dismal jobs, industrial production and corporate earnings reports so far this year have heightened investor fears that the worst U.S. recession in decades is deepening.

J C Penney Co. reported a 51 percent drop in fourth-quarter profit as customers sharply cut spending on clothing and other more discretionary items. The department store chain also projected a wider first-quarter loss than analysts had predicted.

Home improvement retailer Lowe's said its fourth-quarter profit dropped 60 percent, and its earnings forecast for this year was worse than expected.

Crude investors have been looking to stock markets as a broad gauge of sentiment on the economy, and the Dow Jones industrial average fell 1.3 percent Friday and 6.2 percent last week to a 6-year low.

"The macroeconomics news has been nothing but gloomy, especially on jobs, which really affects the real economy," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.

"Demand looks gloomy in the near term, so there continues to be a lot of downward pressure on oil."

Output reductions by the Organization of Petroleum Exporting Countries are helping to bolster prices, which fell as low as $35 a barrel last week.

OPEC has pledged to cut 4.2 million barrels a day from production since September, and the group's former president, Algerian Energy and Mines Minister Chakib Khelil, told state media on Sunday that the 13-nation cartel is likely to cut further when it meets on March 15.

The Energy Information Agency reported last week that crude inventories in US storage fell unexpectedly, proof the OPEC cuts are starting to impact supplies, Shum said.

"OPEC production cut are starting to show up in real data rather than just anecdotal evidence," Shum said. "Oil has shown a remarkable resilience considering the bad economic backdrop."

In other Nymex trading, gasoline futures fell 0.19 cent to $1.07 a gallon. Heating oil rose 0.33 cent to $1.20 a gallon, while natural gas for March delivery jumped 5.2 cents to $4.06 per 1,000 cubic feet.

Brent prices rose 20 cents to $42.09 on the ICE Futures exchange in London.