UPDATE 8-Oil rises on hopes for U.S. stimulus plan

* U.S. jobless claims surge to 26-year high

* OPEC may discuss 1 million bpd cut - source (Updates with settlement prices)

NEW YORK, Feb 5 - Oil prices rose on Thursday as part of a wider market rally on hopes the Obama administration's plan to shore up the financial system would help banks stem losses and revive lending.

U.S. senators working to craft the stimulus package said they had agreed it should be close to the $800 billion wanted by President Barack Obama. Senate leader Harry Reid said he believed he had the votes to pass it.

"Stocks turned around, but the ability of the oil market to hold $40 the last few days shows there is a little bit of sentiment that things might be improving," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

U.S. crude settled 85 cents higher at $41.17 a barrel. London Brent crude rose $2.31 to settle at $46.46 a barrel.

Prices had fallen earlier as weak economic data stoked concerns about flagging oil demand.

The U.S. Labor Department said initial claims for state unemployment insurance benefits in the week ended Jan. 31 rose by 35,000 to a seasonally adjusted 626,000, the highest since the week ending Oct. 30, 1982, and above analyst forecasts of 585,000.

The Bank of England slashed interest rates to a record low to fight recession, but the ECB kept its main rate on hold despite German and Spanish data confirming a sharp downturn.

Oil prices have tumbled from record highs in July over $147 a barrel as the economic crisis hits fuel demand. The Organization of the Petroleum Exporting Countries has agreed to production cuts totaling 4.2 million barrels per day from levels in September.

The cartel may cut more oil output at a meeting next month, and one OPEC source said a reduction of 1 million bpd may be discussed.

OPEC seaborne oil exports, excluding Angola and Ecuador, will hold steady at a five-year low in the four weeks to Feb. 21, UK consultancy Oil Movements said.

On Wednesday, U.S. government data showed U.S. crude inventories last week jumped by 7.2 million barrels to an 18-month high, more than double analysts' expectations and the sixth straight weekly rise as demand slowed further.