Oil prices fell on Tuesday on concerns the swine flu outbreak could further depress fuel demand, already hard hit by the global financial crisis. US crude oil settled 22 cents lower at $49.92 a barrel, off earlier lows of $48.55. London Brent fell 33 cents to $49.99 a barrel.
The new strain of swine flu virus that has killed up to 149 people in Mexico has spread to more countries, including Israel and New Zealand, raising the spectre of a pandemic and hurting financial markets. 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.
"Prices remain in a bit of a swoon as market participants fret that a potential influenza pandemic might prove fatal to the frail signs of recovery just beginning to show," said Mike Fitzpatrick, vice president at MF Global in New York. Oil demand has already tumbled due to the global economic crisis, which has sent prices off record highs over $147 a barrel in July.
Some industry experts said that with demand already depressed, the effects of the swine flu could be muted compared with Sars. "This time around, demand for fuel has already been cut to the bare bones and therefore propensity for cutting demand further is somewhat limited," said Nauman Barakat, senior vice president at Macquarie Futures USA. Gains on Wall Street limited oil's losses.
US stocks rose as housing and consumer confidence data fuelled hopes a recession was easing, offsetting concerns that major banks may need to raise more money. Data showed US house prices tumbled nearly 19 percent in February, but for the first time since October 2007 the decline was not a record, suggesting the housing market might be closer to a bottom.
Analysts polled by Reuters ahead of weekly US inventory data forecast crude stocks in the world's top consumer rose again last week due to slumping demand, while distillate stocks were also seen rising. Gasoline inventories were expected to have fallen. US crude stocks were seen rising 2.1 million barrels in the week to April 24, according to the poll, taken ahead of data from the American Petroleum Institute to be released later Tuesday and US government data on Wednesday.
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