Oil fell more than 6 percent to around $47 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.
President Barack Obama said on Sunday the U.S. economy remained under strain and his top economic adviser tempered hopes for a speedy recovery that have driven the stock market to successive gains.
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.
U.S. crude for May delivery was down $3.35, or 6.7 percent, at $46.98 a barrel by 1350 GMT. London Brent crude for June fell $2.75 to $50.60.
Near term, we don't see any supportive factors for the oil market, said Harry Tchilinguirian, oil analyst at BNP Paribas in London. We have not yet turned the corner on the economy, oil demand is very weak and inventories are high.
Christopher Bellew, a broker at Bache Commodities, agreed:
There's still so much bearish fundamental data it's hard to see it (oil prices) rising that much.
President Obama said on Sunday the economy remained under strain, and his top economic adviser Paul Volcker said the country's recovery would be a long slog.
U.S. stocks opened lower on Monday as investors fretted about the health of the U.S. economy and the outlook for the financial sector. <.N>
The head of the International Monetary Fund, Dominique Strauss-Kahn, said the agency would cut its global economic forecasts in the coming week. He expected a recovery to start in the first half of next year.
Oil has fallen nearly $100 from its record high of over $147 last July, but has flattened out to trade 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 said on Monday it did not expect OPEC to curb output again when it meets in May and did not see a recovery in oil demand until 2010.
Some oil analysts see further price weakness through the northern hemisphere summer before the market recovers.
BNP Paribas forecasts 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.
Asked at an energy conference in Dubai when a recovery in oil demand was expected, IEA Deputy Executive Director Richard Jones replied: Early next year.
United Arab Emirates Oil Minister Mohamed al-Hamli told reporters at the 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.
A senior oil executive said on Monday there was a lot of oil stored aboard ships around the world. There are a 100 million barrels of oil floating right now, Pierre Barbe, president, trading and shipping at Total
(Additional reporting by Fayen Wong in Perth; editing by James Jukwey)