Crude tumbles below $50 for the first time in a week

Houston : Oil prices tumbled below $50 on Monday as unease about the economy - from Asia to America - raised doubts about the global appetite for energy.

Benchmark crude for May delivery fell nearly six per cent, or $3, to $49.38 a barrel on the New York Mercantile Exchange.

In London, Brent prices fell $2.06 to $49.92 a barrel on the ICE Futures exchange.

Most energy-market analysts found no fundamental reason for a rally this month that pushed oil prices from $40 per barrel to more than $50. Crude inventories continue to build even with Opec cutting production and domestic producers suspending oil projects.

Oil prices have moved higher as a spate of positive economic heartened investors. Just last week, markets rallied behind word of a new plan to resolve the nation's banking crisis and a report that consumer spending rose in February for a second straight month.

Energy markets, however, soon grew pessimistic about recent gains for oil and natural gas, with many traders selling off on Friday.

"None of these burned a single hydrocarbon or pulled a single gallon [of gasoline] from storage," the energy consultancy Cameron Hanover said in a note to clients yesterday.

"By Friday, it was just too much macroeconomic news and not enough oil fundamental news that had pushed prices higher."

Losses by major corporations, from banking to the industrial sector, have boosted the amount of oil held in storage and weighed on prices.

The US government last week said crude storage facilities were brimming with more oil than they've had in 16 years.

Combined with the strategic petroleum reserve, the nation now has 1.05 billion barrels of oil in storage - enough to fuel roughly 44 million cars for a year.

"You can't swing a cat without hitting a barrel of crude oil in the United States," analyst Stephen Schork said in his daily markets report yesterday.

Crude is piling up as airlines, manufacturers, automakers and just about every other sector slow down and millions of workers lose their jobs. US stores of natural gas also rose by three billion cubic feet to about 1.65 trillion cubic feet for the week ended March 20.

Natural gas prices have fallen to levels last seen nearly seven years ago as industries cut costs and slow factory production.

The Opec has promised to slash production by 4.2 million barrels per day, but analysts are at odds about the level of compliance by Opec members.