LONDON (Dow Jones)--Nymex crude oil futures fell toward $48 a barrel Monday in London, pressured by lower equity markets and a stronger U.S. dollar.
Rising risk aversion and pessimism over the global economy prompted oil prices to shed over $2 a barrel, or around 4%.
"Provided the U.S. currency remains relatively strong and equities tumble, both (crude) markets could slip towards $50 a barrel in London and $45 a barrel in New York," said Andrey Kryuchenkov, vice president of commodities research at VTB Capital in London.
At 1110 GMT, the front-month June Brent contract on London's ICE futures exchange was down $1.73 at $51.62 a barrel.
The front-month May contract on the New York Mercantile Exchange was trading $2.20 lower at $48.13 a barrel.
The ICE's gasoil contract for May delivery was down $17.75 at $440.75 a metric ton, while Nymex gasoline for May delivery was down 337 points at 145.90 cents a gallon.
Oil fell as traders shifted their focus back to the sluggish U.S. economy as a reason to sell.
"We still worry that the recent gains have been built more on sentiment than solid foundation as fundamentals still don't show any strength," said Ole Hansen, manager of the futures and fixed income trading desk at Saxo Bank in Copenhagen.
In the near term, "we face a period where we may be struggling to sustain prices at current levels as macro-economic data still points towards slowing demand," Hansen added.
Monday's sell-off was also underpinned by U.S. crude oil inventories, which have swelled to their highest level 19 years.
The United Arab Emirates' oil minister, Mohammad Al Hamli, said global oil markets are well supplied Monday, even after three successive output cuts by the Organization of Petroleum Exporting Countries since September. However, he cautioned that producers need prices at "reasonable" levels to maintain investment.
A report from Goldman Sachs published late Friday was also weighing on prices, a crude oil trader in London said. The bank forecast West Texas Intermediate crude oil would fall to $45 a barrel in the near term on deteriorating demand.
"We continue to expect the next step in WTI prices to be a move lower, as lower prices will be required to shore up demand while keeping supply off the market," analysts led by David Greely said in the report.
But other commentators saw the potential for crude prices to rebound, particularly if equities resume last week's rally.
"The mood towards commodities, and particularly oil, is positive and this is not for turning as long as there are prospects of an economic recovery in the next 12 months," London-based brokerage PVM Oil Associates said in a note.
Meanwhile, oil prices also got little support from comments signposting tighter oil markets later this year.
Prices were "stabilizing," due to production curbs implemented by the Organization of Petroleum Exporting Countries, Nobuo Tanaka, executive director of the International Energy Agency said Monday at a conference in Beijing.
"If production remains at the current level, we still see tightening of the market to the end of this year," Tanaka warned.
-By Lananh Nguyen, Dow Jones Newswires; +44 (0)20-7842-9479; lananh.nguyen@dowjones.com