Oil slid nearly 8 percent to $46 a barrel on Monday, depressed by a rising U.S. dollar and growing caution about the pace of any economic recovery and its impact on oil demand.
U.S. crude for May delivery dropped $3.97, or 7.9 percent, to $46.36 a barrel by 12:54 p.m. Brent crude for June fell $3.15 to $50.20.
The May U.S. crude contract expires on Tuesday, which traders also cited as a factor helping to pressure the market.
Weaker equity markets and a stronger U.S. dollar may be encouraging the selling, and the expiration of the May crude futures on Tuesday may be adding a sense of urgency to the trade, but we also see this as a recognition that the poor U.S. demand and inventory statistics of the past few weeks do matter, Tim Evans, analyst at Citi Futures Perspective, said in a research note.
The International Monetary Fund will cut global economic forecasts in the coming week, the agency's head, Dominique Strauss-Kahn, said on Monday, adding that he expected a recovery to start in the first half of next year.
U.S. stocks slid on Monday as investors worried about the sustainability of better-than-expected quarterly earnings after Bank of America reported a big increase in troubled loans<.N>
Shares of both Bank of America
The dollar hit a one-month high against a basket of currencies on Monday. A rising dollar can limit the appeal of commodities and oil to some investors.
Oil has fallen nearly $100 from its record high of over $147 last July, trading around $50 for most of this month in part due to supply cuts by the Organization of the Petroleum Exporting Countries.
The International Energy Agency does not expect OPEC to curb output again when it meets in May and does not expect oil demand recovery until 2010, the agency said Monday.
OPEC member United Arab Emirates' oil minister Mohamed al-Hamli told reporters at a Dubai conference the oil market was well supplied.
A lot of refineries are not running at full capacity. A lot of oil is going into storage, he said. We've seen that stocks are building up. We've seen them go from 52 days to close to 59 days.
Some oil analysts see further price weakness through the Northern Hemisphere summer before the market recovers.
BNP Paribas forecast U.S. light crude oil futures will drop to average just $35 per barrel in the second quarter of 2009, down from over $43 in the first quarter, before recovering to $45 in the third quarter and $58 in the fourth.
(Additional reporting by Robert Gibbons in New York, Christopher Johnson and Alex Lawler in London and Fayen Wong in Perth; Editing by Christian Wiessner)