SINGAPORE - Oil prices fell Wednesday in Asia as crude markets followed equities down on waning optimism the U.S. economy will soon recover from a severe recession.
Benchmark crude for May delivery fell $1.11 to $48.05 a barrel by late afternoon in Singapore in electronic trading on the New York Mercantile Exchange. The contract fell $1.90 on Tuesday to settle at $49.15.
Oil and stock markets have dropped this week, winding back March's big rally, as investors eye what could be a grim first quarter U.S. corporate earnings season.
Oil traders often look to stocks as a measure of investor sentiment about the overall economy. The Dow Jones industrial average fell 2.3 per cent Tuesday. Asian markets also dropped Wednesday.
Alcoa Inc., the world's third-largest aluminum maker, reported a quarterly loss of $497 million as revenue dropped 44 per cent. Alcoa was the first blue chip company to report earnings for the quarter and is considered an indicator of upcoming results from other firms.
"The rally we saw in oil and equities was based on optimism that all the fiscal stimulus will be effective in sparking demand down the track," said Toby Hassall, an analyst with Commodity Warrants Australia in Sydney. "But we haven't seen much evidence of that yet."
Investors will be looking to the Energy Information Administration's weekly inventory report on Wednesday for a gauge of U.S. crude demand. The International Energy Agency will follow with its monthly global oil demand survey and outlook on Friday.
Last week, the EIA report showed that crude inventories rose by 2.8 million barrels to 359.4 million barrels, 15.5 per cent above year-ago levels.
"With inventories as high as they are, any rally in crude is unlikely to be sustained," Hassall said. "We've got a massive inventory overhang."
In other Nymex trading, gasoline for May delivery fell 3.64 cents to $1.42 a gallon and heating oil dropped 2.53 cents to $1.37 a gallon. Natural gas for May delivery was steady at $3.56 per 1,000 cubic feet.
In London, Brent prices fell 89 cents to $50.33 a barrel on the ICE Futures exchange.
