- The Washington Times - Wednesday, April 15, 2009

SINGAPORE (AP) - Oil prices hovered around $49 a barrel Wednesday in Asia as an unexpected drop in U.S. retail sales last month suggested crude demand could remain weak amid the worst recession in decades.

Benchmark crude for May delivery fell 21 cents to $49.20 a barrel by midday in Singapore in electronic trading on the New York Mercantile Exchange. The contract on Tuesday fell 64 cents to settle at $49.41.

A rally that lifted prices from below $35 in February has stalled in the last couple weeks near $50 as investors look for signs of how long and deep the worst global slowdown in decades will be.

On Tuesday, the Commerce Department said retail sales fell 1.1 percent in March, far worse than the slight increase that analysts expected and marking the biggest fall in three months. Businesses also reported they slashed inventories for a sixth straight month in February.

“By no means are we out of the woods just yet,” President Barrack Obama said Tuesday.

“Demand will have to come back before you see the oil price move up from $50 in a sustained way,” said Ben Westmore, energy analyst with National Australia Bank in Melbourne. “We haven’t seen any signal that oil demand is turning, and things like falling retail sales in the U.S. contribute to that view.”

Traders also are focused on weekly petroleum inventory data that the Energy Information Agency will release Wednesday. Analysts expect a build of 2.5 million barrels in crude stocks, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. Crude stocks already are at 16-year highs.

“Even when demand does kick back in, there will be a supply response that’s easily available to cushion the price for some time,” Westmore said.

OPEC production cuts have helped bolster prices. The Organization of Petroleum Exporting Countries, which next meets on May 28, has announced 4.2 million barrels a day of output quota reductions since September.

“It looks like OPEC is making a concerted effort to try to stick to those production quotas,” Westmore said. “If prices decline a little, I would expect another output cut at the next meeting.”

In other Nymex trading, gasoline for May delivery fell 0.76 cent to $1.45 a gallon and heating oil was steady at $1.40 a gallon. Natural gas for May delivery rose 1.5 cents to $3.70 per 1,000 cubic feet.

In London, Brent prices fell 23 cents to $52.06 a barrel on the ICE Futures exchange.

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