SIOUX FALLS, S.D. – Oil prices fell below $50 a barrel Monday after the International Energy Agency said it expects global crude demand to drop this year amid the worst worldwide recession in decades.
Benchmark crude for May delivery dropped $2.97 to $49.27 a barrel on the New York Mercantile Exchange after last settling on Thursday at $52.24. Trading was closed on Friday for the Good Friday holiday.
The Paris-based IEA, an energy policy adviser comprised of 28 countries, said on Friday that demand this year will likely fall by 2.4 million barrels a day to 83.4 million barrels, or 2.8 percent lower than last year.
“In other words, the IEA lowered its estimate the equivalent of the daily output of Iraq,” analyst and trader Stephen Schork said in his daily Schork Report.
Oil prices have rallied from below $35 a barrel in February, mirroring a jump in stock markets, as investors anticipate massive global stimulus packages may spark a recovery in the second half.
Retail gasoline prices fell overnight to a new national average of $2.051 for a gallon of regular unleaded, down a tenth of a cent from Sunday, according to auto club AAA, Wright Express and Oil Price Information Service. Gasoline is 13.5 cents a gallon higher than a month ago but about $1.32 a gallon cheaper than it was last year this time.
Traders will be watching a slew of quarterly corporate earnings reports this week for signs the worst of the economic downturn is over. Banks such as Goldman Sachs Group Inc., Citigroup Inc. and JPMorgan Chase & Co. will report this week along with Intel Corp., Johnson & Johnson, Mattel Inc.
On Sunday, Iran’s oil minister Gholam Hossein Nozari told state television that a price of between $75 and $80 dollars a barrel is desirable for both Tehran and oil consumers.
Iran is a member of the Organization of Petroleum Exporting Countries, which as announced production cuts of 4.2 million barrels a day since September.
“OPEC compliance with the cuts remains quite high, but nobody, even in OPEC, expects prices to get to $75 this year,” said Victor Shum, an analyst with consultancy Pervin & Gertz in Singapore. “In the longer-term, it will likely get there, but not this year.”
In other Nymex trading, gasoline for May delivery fell 7.11 cents to about $1.41 a gallon and heating oil dropped 7.27 cents to $1.3651 a gallon. Natural gas for May delivery sank 8.1 cents to $3.53 per 1,000 cubic feet.
In London, Brent prices fell $2.42 to $51.64 a barrel on the ICE Futures exchange.