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Tue 14 Apr 2009 08:01 AM

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Oil slips back below $50 a barrel

Declines early on Tuesday extend 4% loss in previous session amid concerns over oil demand.

Oil slipped under $50 a barrel on Tuesday, extending its 4.2 percent fall overnight after the International Energy Agency slashed its demand forecast on expectations of another rise in US crude stocks.

The US Energy Information Administration (EIA) releases its short-term energy outlook later on Tuesday, which will give an estimate of global and US oil demand for the year, while OPEC publishes its monthly view on Wednesday.

By 6.45am UAE time, US crude for May delivery was down 60 cents at $49.45, after falling $2.19 to settle at $50.05 overnight. ICE Brent crude was down 8 cents at $52.06.

Oil prices have been stuck in a $47-$54-range for the past four weeks, having recovered from a low of $32.40 in December.

They are still down almost $100 from a record high above $147 last July.

The IEA said on Friday world oil demand would fall by 2.4 million barrels per day (bpd) this year from 2008 to 83.4 million bpd, as the rate of contraction in fuel consumption reached levels last seen in the early 1980s.

"The IEA report is a wake-up call of sorts, and we will see a widening of the contango in the market. We'd probably see front-month crude trading down, deep into the $40s in the near term," said Tony Nunan, assistant manager of risk management at Tokyo-based Mitsubishi Corp.

"But this is a two-tiered market - one that's weak in the short term due to collapsing demand and high inventories, but stronger in the medium term, based on the belief that all the stimulus packages will probably get the economy out of its funk by year-end."

The release of Producer Price Index (PPI) and retail sales for March later on Tuesday will offer more clues on the health of the US economy.

On the supply front, Saudi Arabia will trim oil supplies to some of its Asian customers in May, and one European buyer suggested the world's top exporter was concerned about high inventories.

Saudi Arabia has been largely responsible for OPEC's high level of compliance - estimated at 80 percent - with agreements to cut output by a total of 4.2 million bpd since September last year.

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