NEW YORK (Reuters) - Oil prices fell nearly 3 percent on Monday to near $51 a barrel as U.S. stock markets sputtered on worries over the banking sector and the dollar gained against the euro.
U.S. light crude for May delivery fell $1.46 to settle at $51.05 a barrel. London Brent crude fell $1.23 to $52.24 a barrel.
“Looks like stocks and the dollar reversed their earlier moves and oil followed,” said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc.
U.S. equities markets were down roughly 2 percent as a prominent analyst warned the bank sector’s problems have further to run and as the potential collapse of a takeover of Sun Microsystems hurt sentiment in the technology sector. .N
Oil prices have been tracking equities markets closely in recent weeks as energy dealers use stock index performance as a gauge of sentiment around the economy.
Oil prices have gained roughly 40 percent since mid-February as equities markets rose and OPEC producers cut output, though oil’s gains have been limited by continued weak global demand and rising inventory levels.
U.S. commercial crude stockpiles are running at a 16-year high, according to the Energy Information Administration.
Oil analysts said they expected this week’s EIA data to be released on Wednesday to show yet another increase in inventories due to high import levels and weak demand from domestic refiners.
Goldman Sachs said in a note received by Reuters on Monday that crude oil price rallies would be short-lived until the second half of 2009 because of weak fundamentals.
It said recent oil price rallies had been fueled by optimism over future stabilization in the financial system and in global economic growth, but for the time being these rallies were unlikely to be sustained.
“We continue to expect that a more stable demand environment, reinforced by the likely need for the industry to restock during second-half 2009, will help push the oil market into a sustained deficit later in the year,” it said.
Additional reporting by Christopher Johnson in London, Fayen Wong in Perth and Angela Moon in Seoul; Editing by Christian Wiessner