Oil prices slide under $50 on economic woes

Oil prices sank underneath 50 dollars per barrel on Monday, in line with stock markets on renewed concerns for the global economy and the struggling US auto sector, traders said.

New York's main futures contract, light sweet crude for delivery in May, dropped 2.87 dollars to 49.51 dollars per barrel, falling under 50 for the first time since March 18.

Brent North Sea crude for May shed 2.65 dollars to 49.33 dollars a barrel, after earlier passing under the psychological barrier for the first time since March 20.

Wall Street shares accelerated losses on Monday after the US government warned General Motors and Chrysler could face bankruptcy, stoking fresh fears about the recession-hit US economy.

European stock markets plummeted as the US unveiled plans for a major shake-up in the auto industry, with London's FTSE 100 index of leading shares falling 3.49 percent to 3,762.91 points.

"Worries regarding demand weakness are largely responsible for the decline," said Calyon analyst Christophe Barret.

"Indeed, it is difficult to be bullish on oil prices in an environment where economic forecasts are constantly revised downward, with ongoing recession getting deeper and deeper."

Prices have collapsed since striking record peaks above 147 dollars per barrel in July as the global economic downturn has ravaged the world's appetite for energy.

Crude oil has shed about five dollars since Thursday as demand concerns have returned to haunt the market amid plunging world stock markets.

"The market is probably a little concerned about the short-term performance of the equity markets," said Mark Pervan, senior commodities analyst of ANZ bank.

Oil prices at about 50 dollars a barrel will not support huge investments needed in the sector to meet demand, the secretary-general of the International Energy Forum said on Monday.

"Current prices will not support the huge levels of investment needed to meet future oil demand," Noe van Hulst told the opening of a two-day forum on cooperation between national and international oil companies in Kuwait.

"Around 12 trillion dollars of investments are needed in the oil and gas sector by 2030, or nearly 500 billion dollars per annum, to maintain market balance," Hulst of the Riyadh-based IEF said.

He warned that a delay in investments and projects, which is already taking place, will affect future energy supplies and he called for the maintaining of investment plans, as much as possible, to avoid a "boom-bust cycle."

Meanwhile, Qatar's Energy Minister Abdullah al-Attiya said Monday that the latest price of oil is "reasonable" given the ongoing global economic downturn.

"Fifty (dollars a barrel) is a reasonable price for 2009, considering the global economic crisis," Attiya told reporters on the sidelines of the two-day energy forum in Kuwait City.

"The world economy is in depression and has not reached the bottom. I am still waiting to see the worst," the minister said. (source:AFP)