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NEW YORK (Reuters) - Oil prices edged lower on Monday after producers failed to agree on a plan to curb global supply at a meeting in Qatar, while world stock markets rose and the Dow Jones industrial average closed above 18,000 for the first time since July.
In Qatar, some 18 oil-exporting nations, including OPEC members, failed to agree to stabilize output at January levels until October 2016. A pact fell apart after Saudi Arabia demanded that Iran join in.
Crude oil ended well off the day's lows, however, with a strike in Kuwait slashing the country's oil output by more than half.
Brent crude LCOc1 settled down 19 cents, or 0.4 percent, at $42.91 a barrel, after falling $3 earlier in the session, while U.S. WTI crude CLc1 closed down 58 cents, or 1.4 percent, at $39.78 a barrel, after hitting $37.61 earlier.
Some analysts said they don't expect oil to fall significantly more as a result of the Qatar news.
"While a few forecasters may be dusting off some old $20 WTI expectations as a result of the Doha outcome, we expect solid support in nearby WTI at the $35 mark," Jim Ritterbusch at Chicago oil consultancy Ritterbusch & Associates said.
A recent rebound in oil and signs that the U.S. economy is slowly improving have helped stocks rally from a steep selloff earlier this year that had pushed the S&P 500 down as much as 10.5 percent.
On Wall Street, Walt Disney rose 2.9 percent a share after its "Jungle Book" film dominated the weekend box office, while Hasbro jumped 5.8 percent after reporting better-than-expected quarterly profit and revenue.
An index of energy shares .SPNY rose 1.6 percent as crude prices pared losses.
The Dow Jones industrial average .DJI rose 106.7 points, or 0.6 percent, to close at 18,004.16, the S&P 500 .SPX gained 13.61 points, or 0.65 percent, to 2,094.34 and the Nasdaq Composite .IXIC added 21.80 points, or 0.44 percent, to 4,960.02.
MSCI's all-country world stock index .MIWD00000PUS was up 0.2 percent, while Europe's pan-regional FTSEurofirst 300 index .FTEU3 closed 0.4 percent higher.
Brazil's Bovespa .BVSP index fell 0.6 percent as a vote to impeach President Dilma Rousseff looked set to force her from office after 13 years of leftist Workers' Party rule.
In the foreign exchange market, the U.S. dollar weakened against most currencies after the impact of oil producers' failure to agree on a plan to curb global supply faded, boosting risk appetite.
The dollar index, which measures the greenback against a basket of six major currencies, was down 0.22 percent at 94.486 .DXY.
U.S. Treasury yields rose as oil prices ended off their lows and as investors focused on next week's Federal Reserve meeting.
"Oil prices are going to continue to be very important to the market," said Mary Ann Hurley, vice president in fixed income trading at D.A. Davidson in Seattle.
Benchmark 10-year notes US10YT=RR fell 6/32 in price to yield 1.77 percent, up from 1.75 percent on Friday.
Additional reporting by Barani Krishnan and Karen Brettell in New York, and Noel Randewich in San Francisco; Editing by Paul Simao and Meredith Mazzilli