Crude oil fell for the first time in five days in New York on concern the U.S. economy will keep shrinking, worsening an oversupply. The economy in the world’s largest oil consumer will continue to contract “for some time,” Lawrence Summers, director of the White House National Economic Council, said yesterday. Increased output by non-OPEC producers has left the market oversupplied by about 720,000 barrels a day, said Algerian Oil Minister Chakib Khelil. “It’s difficult to see a really sustained rally in oil,” said Toby Hassall, research analyst at Commodity Warrants Australia Pty in Sydney. “There are so many downside risks to the global economy.” Crude oil for June delivery fell as much as $1.18, or 2.3 percent, to $50.37 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $50.39 a barrel at 11:56 a.m. in Singapore. The contract jumped 3.9 percent to $51.55 a barrel on April 24 as a weaker dollar and rising equity prices boosted investment in commodities. Oil gained $5.67 in its first four- session rally in a month, trimming the weekly decline to 1.8 percent. “As long as people are playing commodities as a proxy for the global economy, we’ll continue to see a floor under prices around the $50 level,” said Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy in Singapore. “If you look at the fundamentals though, prices should be about $10 lower. Demand is weak and supplies are high.” $70 Oil Crude prices need to be at $70 a barrel to ensure continued investment in the industry, Abdalla el-Badri, secretary-general of the Organization of Petroleum Exporting Countries, said in Algiers yesterday. Oil may reach $60 a barrel by the end of 2009, Khelil said. OPEC pumps about 40 percent of the world’s oil. The group agreed last year to cut output by 4.2 million barrels and will review production again when it meets May 28. Saudi Arabia, the biggest producer, is under pressure from the rest of OPEC to pare output further, the Kingdom’s former oil minister Sheikh Ahmad Zaki Yamani said in Cairo yesterday. “I can’t see them cutting,” Commodity Warrants’ Hassall said. “They’ve played their cards pretty well so far. They’ve actually been fairly successful if you look at where prices are, considering the global macro environment.” Stimulus Spending Brent crude for June settlement fell as much as 99 cents, or 1.9 percent, to $50.68 a barrel on London’s ICE Futures Europe exchange. The contract was at $50.75 a barrel at 11:50 a.m. Singapore time. It climbed $1.56, or 3.1 percent, to $51.67 a barrel on April 24. The world’s 20 largest nations will spend $820 billion to shore up their economies this year and $660 billion in 2010, the International Monetary Fund said yesterday. The biggest effect from the measures may come toward the end of this year, an IMF official told reporters on condition of anonymity. Expectations of that recovery have been reflected in equity markets, which have in-turn supported crude prices, Hassall said. While physical demand remains weak, oil prices may climb “toward $55” a barrel if stock prices can extend their gains. “But it’s a bit of a stretch given we have very high levels of inventory, which are still rising,” he said. U.S. oil stockpiles rose for a seventh week to 370.6 million barrels on April 17, the highest since September 1990. Hedge-fund managers and other large speculators are betting on declining New York oil futures for the first time in six weeks, according to U.S. Commodity Futures Trading Commission data. Speculative net-short positions, or bets prices will fall, outnumbered long positions by 14,605 contracts on April 21, the Washington-based commission said April 24. A week earlier, traders were net-long 4,962 contracts. “That’s the way people are trading,” said Hudson Capital’s Kornafel. “They are trading long below $45 and trading short above $50.”

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