LONDON (Reuters) – Oil fell more than 4 percent toward $48 a barrel on Monday, weighed down by a rising U.S. dollar and growing caution about the pace of any economic recovery and its impact on oil demand.
President Barack Obama said on Sunday the U.S. economy remained under strain and his top economic adviser tempered hopes for a speedy recovery that have driven the stock market to successive gains.
The dollar rose to a one-month high against the euro as sharp falls in equities sent investors back to the perceived security of the U.S. currency. A rising dollar can limit the appeal of commodities and oil to some investors.
U.S. crude for May delivery was down $2.20 at $48.13 a barrel by 1118 GMT (7:18 a.m. EDT).
London Brent crude for June fell $1.70 to $51.65.
“It’s a little bit weaker because of the stronger dollar but still in the same range,” said Christopher Bellew, a broker at Bache Commodities. “There’s still so much bearish fundamental data it’s hard to see it rising that much.”
Oil prices rose at the end of last week on optimism that the U.S. economy might be recovering.
But President Obama said the economy remained under strain, and his top economic adviser Paul Volcker said the country’s recovery would be a “long slog.”
MARKET “WELL SUPPLIED”
The International Monetary Fund also sounded a cautious note. Its managing director, Dominique Strauss-Kahn, said the agency would cut its global economic forecasts in the coming week. He expected a recovery to start in the first half of next year.
Oil has fallen nearly $100 from its record high of over $147 last July, but has flattened out to trade around $50 for most of this month in part due to supply cuts by the Organization of the Petroleum Exporting Countries.
The International Energy Agency said on Monday it did not expect OPEC to curb output again when it meets in May and did not see a recovery in oil demand until 2010.
Asked at an energy conference in Dubai when a recovery in oil demand was expected, IEA Deputy Executive Director Richard Jones replied: “Early next year.”
United Arab Emirates Oil Minister Mohamed al-Hamli told reporters at the conference the oil market was “well supplied”:
“A lot of refineries are not running at full capacity. A lot of oil is going into storage,” he said. “We’ve seen that stocks are building up. We’ve seen them go from 52 days to close to 59 days.”
One bright spot for commodities’ sellers remained China, with a government researcher writing in the official China Securities Journal that the economy of the world’s No.2 oil consumer is bottoming out.
Refined fuel inventories held by China’s oil duopoly fell 14.7 percent at the end of March from a month ago, and sales rose 21 percent in the same period, providing signs of improving fuel demand.
(Additional reporting by Christopher Johnson in London and Fayen Wong in Perth; editing by William Hardy)