AM: Oil falls below $50 as investors eye U.S. earnings
SINGAPORE - Oil prices fell below US$50 a barrel Monday in Asia as investors braced for a slew of U.S. corporate earnings reports this week that could temper optimism about global economic recovery.
Benchmark crude for May delivery fell 91 cents to US$49.42 a barrel by midday in Singapore in electronic trading on the New York Mercantile Exchange. The contract Friday rose 35 cents to settle at US$50.33.
Oil prices have played peek-a-boo with US$50 a barrel this month after dropping below US$35 in February as investors struggle to decipher how the economy will perform in the second half.
Stock markets have jumped more than 20 per cent in the last six weeks on expectations that massive global stimulus packages will spark a recovery by the end of the year.
Among the hundreds of companies due to report are 3M Co., Bank of America Corp., Boeing Co., Coca-Cola Co., DuPont, IBM Corp., McDonald's Corp., Merck & Co., and Microsoft Corp.
On Thursday and Friday, investors expect to get figures on U.S. sales of existing and new homes for last month. A report is also due on demand for big-ticket manufactured goods.
"This is probably where you're going to see surprises on the downside rather than the upside," said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne. "People are wary that the markets have had a good run in the last month, but the fundamentals haven't changed much."
OPEC production cuts have helped bolster prices this year. The Organization of Petroleum Exporting Countries, which next meets on May 28, has announced output quota reductions of 4.2 million barrels a day since September.
"A key support is coming from expectations that OPEC is going to try to match the slowdown in crude demand by cutting supply," Pervan said. "OPEC doesn't want to cut production, so they may just talk up tightening compliance at the next meeting."
Pervan expects oil prices to dip to between US$40 and US$45 a barrel in September before rising to near US$55 by the end of the year.
"People are going to be disillusioned in the near term," Pervan said. "We see the global economy not looking at all pretty until the second half of next year."
In other Nymex trading, gasoline for May delivery fell 2.51 cents to US$1.47 a gallon and heating oil fell 1.06 cents to US$1.41 a gallon. Natural gas for May delivery slid 3.9 cents to $3.69 per 1,000 cubic feet.
In London, Brent prices fell 78 cents to US$52.57 a barrel on the ICE Futures exchange.
