Oil stays below $50 in Asia over economic jitters

[March 31, 2009]  KUALA LUMPUR, Malaysia (AP) -- Oil prices edged up Tuesday in Asia but remained below $50 a barrel as fears of a major automaker bankruptcy in the U.S. sparked renewed jitters over the global economy.

Benchmark crude for May delivery rose 69 cents to $49.10 by late afternoon in Asian electronic trading on the New York Mercantile Exchange. The contract fell more than 7.6 percent, or $3.97, to settle at $48.41 on Monday.

Traders said the White House's move on Monday to refuse further long-term federal bailouts for General Motors Corp. and Chrysler cast a cloud over the struggling auto industry and raised concerns for the overall economy.

"A possible bankruptcy threatening GM and Chrysler caused the stock market to tumble and worries about the economy have returned to the forefront," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore.

It will be tough for crude prices to return to the $50 a barrel mark as market fundamentals remain weak, he said.

Most energy market analysts found no fundamental reason for a rally this month that pushed oil prices from $40 per barrel to more than $50. Crude inventories continue to build even with OPEC cutting production and domestic producers suspending oil projects.

Jim Ritterbusch, president of energy consulting group Ritterbusch and Associates, said he expects oil to fall as low as $47 in advance of a U.S. crude inventory report, the monthly unemployment report and a meeting of the Group of 20 world leaders in London -- all this week.

"Late in the week, all hell could break loose, but I don't know whether it makes the market go up or down," Ritterbusch said.

Shum said the U.S. crude report is widely expected to a show further build up in inventories, which will exert more downward pressure on prices.

The U.S. government last week said crude storage facilities were brimming with more oil than they've had in 16 years. Combined with the strategic petroleum reserve, the nation now has 1.05 billion barrels of oil in storage -- enough to fuel roughly 44 million cars for a year.

The Organization of Petroleum Exporting Countries has promised to slash production by 4.2 million barrels per day, but there are doubts about the level of compliance by OPEC members.

Shum said there is still optimism that the U.S. economy, the world's largest, could recover later in the year thanks to the government's stimulus spending and plans to buy toxic assets from banks. In the near term, he expects oil to trade between $45 and $50 a barrel.

In other Nymex trading, gasoline for April delivery gained 1.31 cents to $1.393 a gallon while heating oil rose 0.75 cents to $1.3501 a gallon. Natural gas for May delivery added 6.2 cents to $3.801 per 1,000 cubic feet.

In London, Brent prices rose 91 cents to $48.90 a barrel on the ICE Futures exchange.

[Associated Press; By EILEEN NG]

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