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Oil prices suffer sharp losses

Oil prices fell sharply on Monday on the back of the strengthening dollar, weak stock markets and sluggish US energy demand, analysts said.

New York's main futures contract, light sweet crude for May delivery, dropped 2.13 dollars to 48.20 dollars a barrel in morning trade.

Brent North Sea crude for June delivery shed 1.83 dollars to 51.52.

"Crude oil... has suffered declines today, amid a background of dollar strength and equity indices' weakness," said Sucden Financial Research analyst Brenda Sullivan.

The rising US currency makes dollar-priced crude more expensive for foreign buyers and therefore tends to dampen demand.

In the foreign exchange market, the euro sank Monday to a one-month low against the dollar as speculation mounted that the European Central Bank will cut interest rates next month to fight the recession, dealers said.

The European single currency tumbled as low as 1.2959 in morning trade. It later pulled back to 1.2968 dollars, from 1.3043 dollars late in New York on Friday.

Elsewhere, the oil minister of the United Arab Emirates said Monday that oil at 50 dollars a barrel would help bolster the global economy, according to the official WAM news agency.

"OPEC's latest decisions to cut production have led to the stabilisation of prices at the 50 dollar level, a price that provides needed support for the global economy and allows for investments," Mohammad al-Hamli was quoted as saying.

Hamli said the current price reflects the reality of the global recession, adding that "reasonable" oil prices are needed for the revival of the global economy. The United Arab Emirates is the world's ninth-largest oil producer.

In addition, the market was pulled lower after a recent large build-up in US crude stockpiles, which suggests demand remains weak in the world's biggest economy.

Monday's fall in prices is "probably a delayed reaction to the inventory data that came out last week, which was really, really bearish," said Tony Nunan, a risk manager at Mitsubishi Corp in Tokyo.

The US Department of Energy said last Wednesday that crude stocks surged 5.6 million barrels in the week ending April 10 to reach 366.7 million barrels -- the highest level since September 1990.

"Fundamentally we have a demand problem in the world, including the United States," said BMO Capital Markets analyst Bart Melek. "This overhang of supply is going to be with us for some time."