Perth: Oil fell more than 2% to below $49 on Wednesday, pressured by bearish economic news and the prospect of a further rise in US crude inventories, which are already at their highest since 1993.
US crude futures were down $1.44 to $48.22 a barrel by 4:20pm eroding Tuesday’s 2.6% gain.
London Brent crude was down $1.24 to $47.99.
The US government’s Energy Information Administration data to be released later on Wednesday is expected to show a 2.5 million barrel increase in crude oil inventories.
That data follows figures from industry group American Petroleum Institute, which on Tuesday showed crude inventories rose by a greater-than-expected 3.3 million barrels to 357.8 million barrels in the week to 27 March.
“There is still a steep recession, weak demand and high stocks,” said Mike Wittner of Societe Generale.
But oil prices have recovered strongly from a low of $32.40 hit in December and rose more than 11% in the first quarter of this year.
Gains over the first three months were driven by recovering stock markets, signs of a greater investor appetite for risk and output cuts by the Organization of the Petroleum Exporting Countries (Opec).
The producer group has reached agreements to take away 4.2 million barrels per day from September and has delivered almost 80% of the promised reduction.
Reuters latest survey put compliance at 79% for March, the seventh consecutive month in which the group’s output has declined.
In deciding not to lower its output targets further when it met in March, Opec said it was giving the world a chance to recover from global economic downturn and looked ahead to this week’s G-20 meeting in London to stimulate the economy and help shore up fuel demand.
Few expect instant results, but many analysts say Opec, which meets again at the end of May to reassess the situation, has taken out enough oil to bolster prices.
In the immediate term, however, the demand outlook is weak and a fresh flurry of bearish economic news emerged on Wednesday, which weighed on stock markets and added to the pressure on oil prices.
Business confidence in Japan, the world’s second largest economy and the third largest oil consumer after the United States and China, tumbled at its fastest pace ever in the first quarter to the worst on record, the Bank of Japan’s tankan corporate survey showed.
Managing director of the International Monetary Fund Dominique Strauss-Kahn predicted the world economy would contract by 0.5% and 1% this year, in an interview published on Wednesday, following on from IMF reports predicting a decrease of up to one percent this year.