- The Washington Times - Monday, April 13, 2009

SIOUX FALLS, S.D. (AP) - Oil prices fell below $49 a barrel Monday as investors reacted to slipping stock markets and an International Energy Agency report forecasting a drop in global crude demand.

In late morning trading benchmark crude for May delivery dropped $3.24 to $49 a barrel on the New York Mercantile Exchange, as U.S. stock markets began the week lower. Crude dipped as low as $48.84 earlier in the day.

Traders were able to ignore weak demand last week, “but that was only when the stock market was doing as well as it did,” said Phil Flynn, an analyst at Alaron Trading Corp.

Oil had last settled at $52.24 on Thursday, finishing the week early because of the Good Friday holiday.

The Paris-based IEA, an energy policy adviser comprised of 28 countries, said Friday that demand this year will likely fall by 2.4 million barrels a day to 83.4 million barrels, or 2.8 percent lower than last year.

“In other words, the IEA lowered its estimate the equivalent of the daily output of Iraq,” analyst and trader Stephen Schork said in his daily Schork Report.

Flynn said the IEA report put a damper on the mood because the agency usually underestimates demand. The report hails from a consuming nation, so the agency tends to err to the slower-demand side to pressure producing countries and keep prices in check.

“So when they come out with such a bearish number, it really puts pressure on the market,” he said.

Oil prices have rallied from below $35 a barrel in February, mirroring a jump in stock markets, as investors anticipate massive global stimulus packages may spark a recovery in the second half.

Traders will be watching a slew of quarterly corporate earnings reports this week for signs the worst of the economic downturn is over. Banks such as Goldman Sachs Group Inc., Citigroup Inc. and JPMorgan Chase & Co. will report this week along with Intel Corp., Johnson & Johnson, Mattel Inc.

All of the major stock indexes were down in early trading Monday, with the Dow Jones Industrial Average off more than 1 percent.

Retail gasoline prices fell overnight to a national average of $2.051 for a gallon of regular unleaded, down a tenth of a cent from Sunday, according to auto club AAA, Wright Express and Oil Price Information Service. Gasoline is 13.5 cents a gallon higher than a month ago but about $1.32 a gallon cheaper than it was last year this time.

Meanwhile, natural gas futures on the Nymex fell 7.81 cents to $3.539 per 1,000 cubic feet, down from a July peak of $13.69. That could mean savings for consumers next winter, as distributors are already signing contracts to lock in current low rates.

The government’s Energy Information Association says the 1.67 trillion cubic feet of gas in storage around the country is 35 percent more than it was last year, and the glut comes as a global recession has pinched demand, especially in the manufacturing sector.

“The natural gas glut is another sign of what’s been happening with the slowing economy, Flynn said.

On Sunday, Iran’s oil minister Gholam Hossein Nozari told state television that a price of between $75 and $80 dollars a barrel is desirable for both Tehran and oil consumers.

Iran is a member of the Organization of Petroleum Exporting Countries, which has announced production cuts of 4.2 million barrels a day since September.

In other Nymex trading, gasoline for May delivery fell 6.45 cents to $1.4165 a gallon and heating oil dropped 7.81 cents to $1.3507 a gallon.

In London, Brent prices fell $3.12 to $50.94 a barrel on the ICE Futures exchange.

___

Associated Press Writer Alex Kennedy in Singapore contributed to this report.

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