News Service from House Harris

Oil below $50, rally loses steam as stocks fall

Oil below $50, rally loses steam as stocks fall

Eds: RECASTS with more details; UPDATES prices. For global

distribution.

AP Energy Writer

SIOUX FALLS, South Dakota (AP) - Oil prices fell below $50 a

barrel Tuesday as the energy markets took a downhill ride with the

stock markets amid growing doubts about corporate earnings and

global energy demand.

Benchmark crude for May delivery fell $1.69 cents to $49.36 a

barrel on the New York Mercantile Exchange.

In afternoon trading, the major stock market indicators,

including Dow Jones industrials, were off more than 2 percent.

Daniel Flynn, an analyst at Alaron Trading Corp., said oil is

trading off the dollar and the stock indices, and that trend is

likely to continue until global demand picks up and starts tapping

into growing crude stockpiles.

Oil prices have latched onto equities in recent weeks, and both

have risen on hopes that the worst of the recession is over. Oil

prices jumped from below $35 in February to above $54 last month as

economic optimism trumped concerns of poor demand and oversupply

because of the recession.

Supply and demand are key factors, said Tom Kloza, publisher and

chief oil analyst at Oil Price Information Service, but investors

should not overlook the most important fundamental - money flow.

Kloza, noting that the December crude futures contract neared $60

recently, said investors continue to flock to the oil markets for a

long-term hedge against inflation.

"That's really the yin and the yang of it right now, and I don't

know if the yin is going to win or the yang is going to win," he

said.

With few new economic indicators to mull over, traders focused on

the start of first-quarter earnings season, with aluminum giant

Alcoa Inc. scheduled to report after the stock market closes.

Many investors expect dismal earnings pictures from many

companies hit by the recession. As the economy slows, so does demand

for petroleum products such as motor fuels, petrochemicals and

asphalt.

The U.S. Energy Information Administration releases its weekly

inventory report Wednesday morning, and the International Energy

Agency will follow with its monthly global oil demand survey and

outlook on Friday.

"I think everyone is betting that it's going to be a pretty

sharp downward revision in the 2009 forecast," Kloza said.

Flynn said few expect a sunny forecast and the expected bad news

is probably priced into oil already.

In other Nymex trading, gasoline for May delivery fell 1.22 cents

to $1.4633 a gallon. Heating oil lost 2.82 cents at $1.3909 a

gallon. Natural gas for May delivery also slipped, down 16.5 cents

to fetch $3.566 per 1,000 cubic feet. earlier, natural gas hit a new

low of $3.564 per 1,000 cubic feet.

In London, Brent prices fell 95 cents to $51.29 a barrel on the

ICE Futures exchange.

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Associated Press Writers Alex Kennedy in Singapore and George

Jahn in Vienna contributed to this report.

AP-TK-07-04-09 1801GMT