Oil price falls below $52 on gloomy demand outlook

But crude price is still up by nearly 15% in March, one of largest gains since Oct 2007.
Oil price falls below $52 on gloomy demand outlook
By Fayen Wong
Mon 30 Mar 2009 07:35 AM

Oil fell near 2 percent to below $52 a barrel on Monday, extending the previous session's losses, as a bleak near-term energy demand outlook prompted investors to take profit on oil's recent rally.

Analysts said a recent strengthening of the U.S. dollar, which posted its largest one-day again against the euro in more than two months on Friday, also added downward pressure on oil prices.

US oil for May delivery fell 97 cents to $51.41 a barrel by 5am UAE time, after having earlier fallen by $1.26. The contract fell $1.96 to settle at $52.38 a barrel on Friday, pulling back from Thursday's four-month high.

London Brent crude fell 90 cents to $51.08.

Oil is up 14.8 percent since the start of the month and is looking for its biggest monthly gains since October 2007, thanks to rallying stock markets and tightening oil supplies as the Organisation of the Petroleum Exporting Countries (OPEC) curbs exports.

"The overall demand outlook, at least in the short term, continues to look quite bleak. The rally seen in last two weeks might perhaps have ran its course," said Toby Hassall, head of research at Commodities Warrants Australia.

"The fundamentals really don't suggest that oil prices should continue to go upwards. I think we are likely to see more price correction this week."

Industrial output from Japan, world's No. 3 energy consumer, fell by a more-than-expected 9.4 percent in February as weak demand weighed on an economy mired in its worst recession since World War Two, but factories forecast a small rise in production in coming months.

Comments from the Organisation for Economic Cooperation and Development (OECD) which said on Sunday that unemployment is set to reach double digits in many developing and advanced countries also cast a pall over oil prices.

Still, analysts said hopes that the US economy had finally turned a corner was offering some underlying support for oil prices, keeping it above the psychologically important $50-levels.

President Barack Obama said in an interview published on Sunday that he saw "glimmers of stabilisation" in some areas of the US economy, including pockets of the domestic housing market.

US crude oil had hit its highest level so far in 2009 on Thursday at $54.66 a barrel on expectations that efforts by the US government to tackle bad debts and reflate the economy would help boost oil demand.

But prices fell on Friday as the US stock market succumbed to profit taking and banks hinted that March had been a tougher month than the previous two. (Reuters)

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