- The Washington Times - Wednesday, March 18, 2009

Oil prices drifted below $49 a barrel as investors took profits on the rally of recent days and returned their focus to the weak state of the global economy and crude demand.

An expected jump in U.S. oil crude reserves, to be reported later Wednesday, also helped press down prices.

Benchmark crude for April delivery was down 53 cents to $48.63 a barrel near midday in Europe on the New York Mercantile Exchange. Prices rose $1.81 a barrel on Tuesday to settle at $49.16.

In London, Brent prices fell 52 cents to $47.72 on the ICE Futures exchange.

Prices have recently been bolstered by renewed optimism in stock markets, which oil traders often use to measure overall investor sentiment about the economy.

The Dow Jones industrial average rose 2.5 percent Tuesday and the Standard & Poor’s 500 index jumped 3.2 percent. Investors are trying to gauge whether the worst of the U.S. recession is over.

The Commerce Department on Tuesday said construction of new homes and apartments jumped 22.2 percent from January to a seasonally adjusted annual rate of 583,000 units. Economists were expecting construction to drop to a pace of around 450,000 units.

However, months of massive layoffs, falling consumer demand and weak corporate profits have left some traders wary that the drop in crude demand reached a bottom.

“I haven’t seen enough to think oil is going to rally for good,” said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. “I don’t expect oil demand and the price to really bounce back until the second half.”

While oil prices have risen from below $35 last month, they have mostly traded within the $40s since December.

Investors will be watching for the weekly crude inventory report for the week ended March 13 by the Energy Information Administration later on Wednesday. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., expect an increase of crude stocks of 2 million barrels.

“If inventories build, that could slow this rally,” Chu said.

Despite the daily fluctuations, technical analysis was showing that oil prices were making a steadier push back to $50 a barrel than earlier, said Olivier Jakob of Petromatrix in Switzerland.

“The current approach to $50 (a barrel) has been done in a steadier fashion than previously, it is keeping to an ascending line that started in mid-February,” Jakob said.

He also pointed out that with the Nymex April contract expiring Friday, market attention already was turning to the May contract, which posted a high above $50 on Tuesday.

Oil prices rebounded after an initial drop on Monday following OPEC’s decision to leave output levels unchanged. In the weeks leading up to the group’s Sunday meeting, many analysts expected the Organization of Petroleum Exporting Countries to cut production by as much as 1 million barrels a day.

OPEC said it would adhere more closely to the 4.2 million barrels a day of production cuts the 12-nation cartel has announced since September.

In other Nymex trading, gasoline for April delivery fell 0.63 cent to $1.4175 a gallon, while heating oil dropped 0.22 cent to $1.2769 a gallon. Natural gas for April delivery was up 1.8 cents to $3.83 per 1,000 cubic feet.

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Associated Press writer Alex Kennedy in Singapore contributed to this report and Pablo Gorondi reported from Budapest.

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