Tuesday, April 28, 2009

>Crude down 2% as swine flu hits economy sentiment

Singapore - Crude oil futures fell more than 2% Tuesday in Asia as rising concerns over the impact of swine flu on the global economy kept traders cautious, damping buying interest.

Sentiment is also under pressure on expectations oil stockpiles held in the key U.S. market will stay well above seasonal levels.

The American Petroleum Institute industry group will put out weekly oil statistics at 2200 GMT, ahead of Wednesday's official data release from the federal Energy Information Administration.

"The trend is going to be downward...I think there's room to (fall) further. Sentiment is weak," said Ken Hasegawa at Newedge Japan.

On the New York Mercantile Exchange, light sweet crude futures for delivery in June traded at $49.04 a barrel at 0655 GMT, losing $1.10 in the Globex electronic session.

June Brent crude on London's ICE Futures exchange fell $1.21 to $49.11 a barrel.

Oil prices on both sides of the Atlantic tumbled Monday as the spread of swine flu from Mexico fueled uncertainty over the prospects for an economic recovery and by extension, the outlook for energy demand.

The World Health Organization raised its alert level overnight, with confirmed cases of infection in the U.S., Europe, New Zealand, Canada and the epicenter Mexico, where the suspected death toll climbed to 149. Several Asian countries also reported suspected cases, triggering risk aversion Tuesday across markets.

"It's possible for the market to drop to $45 a barrel" within the week, Hasegawa said.

The EIA, in its Weekly Petroleum Status Report due Wednesday, is expected to post an eighth straight weekly increase in crude stockpiles and only minor changes for products, which are above five-year average levels.

Commercially held crude inventories are expected to have climbed 2.3 million barrels in the week to April 24, according to the average prediction from six analysts polled by Dow Jones Newswires.

Stocks previously stood at 370.6 million barrels, the highest since September 1990.

Gasoline stockpiles may have declined by 300,000 barrels while distillates, which include heating oil and diesel, probably increased by 200,000 barrels, the survey showed.

Refinery utilization rates are likely to average 83.4% of capacity, unchanged on week.

Meantime, oil traders will also take their cues from movements in the dollar as well as equities, analysts said.

So far Tuesday, Asian share markets were mixed, with airline and tourism-related stocks staying weak.

The greenback fell to a fresh four-week low against the yen, which in theory should support the demand for dollar-denominated commodities, although the mood was cautious.

"Oil will be more decisive in following financial guidance lower rather than higher going forward, given decidedly bearish fundamentals," Jim Ritterbusch, president at trading advisory firm Ritterbusch and Associates, said in a note to clients.

A two-day policy meeting of the U.S. Federal Reserve under way Tuesday could further lend direction, he added.

At 0650 GMT, oil product futures also lost ground.

Nymex heating oil for May slipped 169 points to 130.60 cents a gallon, while May reformulated gasoline blendstock traded at 138 cents, 132 points lower.

Both May contracts will expire at Thursday's settlement.

ICE gasoil May changed hands at $417.50 a metric ton, down $3.50 from Monday.