Perth: Oil prices extended losses and fell towards $49 a barrel on Wednesday, as fears that the swine flu outbreak could dent fuel demand were further exacerbated by fresh worries about the US banking sector.
Citigroup may have to raise more capital after receiving preliminary results of its stress test from US regulators, people familiar with the matter said, while the Wall Street Journal reported Bank of America or BoA may need billions in new capital.
US crude oil for June delivery fell 79 cents to $49.13 a barrel by 7:47am, adding to Tuesday’s losses of 22 cents. London Brent crude fell 74 cents to $49.25 a barrel.
“Worries about the US banking sector and further developments of swine flu are key drivers pushing oil prices lower,” said Jonathan Kornafel, director at Hudson Capital Energy in Singapore.
“I’m actually surprised that crude prices are not lower than they are considering how there isn’t much optimism left in the equities markets.”
Asian stocks dropped for a second day on Tuesday and Japanese shares hit a one-month low as investors fretted that the global economic outlook could darken further.
Oil’s fall was also encouraged by data that showed US crude oil stocks had risen by 4.6 million barrels in the week to 24 April, according to data released by the American Petroleum Institute, more than double analysts’ expectations for a 2.1 million barrel increase.
The API report foreshadows similarly bearish data from the more authoritative US Energy Information Administration, due to be released at 8:00pm today.
Oil fell on Tuesday on concerns that the swine flu outbreak could become a pandemic and further depress fuel demand, already hard hit by the global financial crisis.
New swine flu infections were found around the world on Tuesday and the spectre of a pandemic hit the travel industry as governments warned people to stay away from Mexico where 149 people have died.
The flu has hit airline stocks on expectations travel will be curtailed, and analysts warned jet fuel demand may slump, citing the drop in consumption that corresponded to the SARS epidemic in 2003.
Oil prices have tumbled off the record high of $147 last July as the global economic crisis shaved off energy demand, but hopes of an economic recovery later this year have kept prices supported around $50 a barrel for most of this month.
Analysts said investors will be keenly watching for statements from the Federal Reserve as policy makers end their two-day meeting, while the US first-quarter gross domestic product data will also help confirm if the recession is easing.