Oil fell below $47 a barrel on Tuesday, giving up previous sessions gains, as news about US credit card defaults dampened sentiments and rekindled worries about the economic health of the worlds No 1 energy consumer. Poor economic data from the US, which saw Februarys industrial output plummeting to its lowest level in almost seven years, was also a stark reminder that the 14-month long recession in the worlds largest economy is far from over, analysts said.
US light crude for April delivery fell 41 cents to $46.94 a barrel by 0222 GMT, reversing some of Mondays gains, that brought oil to settle $1.10 higher at $47.35. London Brent crude fell 56 cents to $45.90. Oils gains on Monday were helped in part by an early rally in US and European stock markets on growing confidence in the banking sector, which outweighed Opecs decision not to cut production target further. But the rally on Wall Street fizzled after American Express said credit card defaults were on the rise, undermining hopes of bank stability that had eased safe-haven buying of gold, debt and the dollar.
In addition, Citigroup Inc - one of the largest issuers of Master Card cards - disappointed analysts as its default rate soared to 9.33 percent in February, from 6.95 percent a month earlier, according to a report based on trusts representing a portion of securities credit card debt. Oil has tumbled $100 from highs above $147 in July last year as the global economic meltdown has dented demand for oil world-wide.
But despite weakening global demand, the Organisation of the Petroleum Exporting Countries met on Sunday and decided not to cut output further, but rather concentrate on existing cuts that total 4.2 million barrels per day since September. With Opec uncertainties behind it, analysts said the market will look to economic indicators and the performance of equities markets for guidance.