Apr 13th, 2009 | SIOUX FALLS, S.D. — 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.
“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.
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