Oil prices fell toward $49 on Tuesday, extending Monday's losses as declines on global stock markets heightened expectations of a further drop in demand for oil products.
A rising death toll from a flu outbreak has also fanned fears of a pandemic potentially hurting the world economy.
U.S. oil futures fell $1.01 to $49.13 a barrel by 1156 GMT (7:56 a.m. EDT), adding to Monday's losses of $1.41. London Brent crude was down 80 cents at $49.52.
I think weakness in equities is keeping prices below $50. Travel stocks are down, this could reduce demand, Bache Commodities broker Christopher Bellew said.
European stocks followed Asian and U.S. markets lower on Tuesday, knocked by growing fears about the economic impact of the swine flu outbreak.
Airline stocks were among the hardest hit as flu concerns were expected to reduce passenger numbers. This would result in a fall in demand for fuel, adding pressure on oil prices.
Analysts drew comparisons between the current health scare and the SARS epidemic in 2003, which sharply reduced fuel demand and sent the U.S. oil price tumbling over 20 percent in a week.
Investment bank J.P. Morgan noted that during the SARS scare, global air passenger travel fell 8.2 percent during the second quarter of the year, and over 19 percent in Asia alone.
Some analysts have cautioned that oil prices could pull back from current levels in the near term as demand remains weak and fundamentals do not support higher prices.
Reflecting still-weak demand, U.S. crude stocks probably rose 2.2 million barrels last week, a preliminary Reuters poll showed.
The poll also forecast a 300,000 barrel decrease in gasoline stocks and a 300,000 barrel build in distillate stocks.
The weekly inventory report from the American Petroleum Institute will be released later on Tuesday.
Oil major BP reported a 62 percent fall in first-quarter net profit on Tuesday due to a collapse in oil and gas prices, but heavy cost cutting helped it beat analysts' expectations.
BP said it recorded a 2 percent rise in oil and gas production to 4.02 million barrels of oil equivalent per day, the first time the company topped the 4 million level since the second quarter of 2006.
Nexen Inc's North Sea Buzzard oilfield, which supplies oil to the benchmark Forties blend, will shut down for four weeks in the third quarter for maintenance, the company said on Tuesday.
Oil prices have recovered from about $35 a barrel in February to hover around $50 for most of this month, tracking a recovery in equities markets.
U.S. crude oil is expected to average nearly $51 a barrel in 2009, a Reuters poll showed on Monday as analysts raised their consensus forecast for the first time since July 2008.
(Editing by Peter Blackburn)