Oil futures extended their decline for a fifth straight session Thursday, set to end at their lowest level in nearly two months as rising U.S. inventories, worries over the U.S. economic stimulus package and mixed economic data weighed on investor sentiment. Crude oil for March delivery fell $1.44, or 4%, to $34.50 a barrel on the New York Mercantile Exchange, set to end below $35 a barrel for the first time since Dec. 19. Meanwhile, March natural gas futures fell 2.2% to $4.432 per million British thermal units. U.S. natural gas inventories dropped by 159 billion cubic feet in the week ended Feb. 6, the Energy Information Administration reported Thursday. Analysts surveyed by Platts had expected a reduction between 165 and 170 billion cubic feet. At 2,020 billion cubic feet, stocks were 44 billion cubic feet higher than last year at this time and 24 billion cubic feet above the five-year average. In other energy trading Thursday, March reformulated gasoline rose 1.8% to $1.2925 a gallon and March heating oil gained 0.7% to $1.3257 a gallon. Stimulus package Negotiators from the House and Senate reached an agreement on a $789 billion economic stimulus plan on Wednesday. The agreement has the support of three key Republican senators and moderate Democrats whose votes are essential to winning approval in the Senate. Read more. "Concerns about the impact of the U.S. stimulus package continue to weigh" on oil prices, said analysts at Action Economics. Energy traders also digested mixed economic data early Thursday showing a new record high in continuing jobless claims as well as an unexpected jump in retail sales. The number of initial claims in the week ending Feb. 7 fell 8,000 to 623,000, a level that is 84% higher than the same period in the prior year, the Labor Department reported Thursday. However, the four-week moving average of continuing claims reached a record, rising 73,750 to 4.75 million. See full story. On the positive side, retail sales increased 1% on a seasonally adjusted basis in January, the first increase since June and the largest percentage increase since November 2007. The gain was unexpected, with economists surveyed by MarketWatch looking for a decline of 0.4%. Read more. Rising inventories Oil prices fell more than 4% Wednesday after data showed U.S. crude inventories rose for a seventh week to an 18-month high. Crude inventories excluding those in the Strategic Petroleum Reserve increased by 4.7 million barrels, more than analysts' expectations, to 350.8 million barrels in the week ended Feb. 6, the Energy Information Administration reported. Gasoline stockpiles fell by 2.6 million barrels while distillate fuels, which include diesel and heating oil, declined by 1 million barrels, the EIA said. "While the risk does remain for crude oil prices to be vulnerable to fresh news of demand weakness or disappointment in stimulus packages, as long as product inventories continue to be drawn down, it would seem unlikely that the full energy complex would see price declines to fresh lows in the short term," said Brenda Sullivan, an analyst at Sucden Financial Research.

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