Oil prices slide in line with stock markets

OIL prices have dropped more than $US1 as traders tracked fresh falls on global stock markets.

New York's main contract, light sweet crude for May delivery, tumbled $US1.46 today from Friday's closing price to end at $US51.05 per barrel on the New York Mercantile Exchange.

In London, Brent North Sea crude for delivery in May dived $US1.23 to $US52.24 a barrel, after earlier shooting as high as $US54.31.

"We're seeing a bit of a correction after the stock market took a hit today," said Bart Melek of BMO Capital Markets. "We're falling towards $US50 after a pretty considerable rally in the last few weeks and a fairly optimistic equity market.

"Melek said he sensed some profit taking, in reaction to the fall in US and European equity markets.

Shares fell as US investors turned cautious ahead of first-quarter earnings news and European sentiment suffered from disappointing retail sales results.

"Traders are certainly realising that we are not out of the woods on the demand side, and that perhaps the optimism that was shown over the last few days was a little bit premature," Melek said.

Global equities had marched higher early today as sentiment was boosted by pre-weekend gains on Wall Street and record demand for HSBC bank's historic rights issue, dealers said.

But European stocks turned south after Wall Street sank on concerns ahead of the US quarterly earnings season starting this week and amid reports that IBM's takeover deal for Sun Microsystems may be shelved.

London Brent oil had breached $US54 in earlier trade on optimism that a global economic recovery could spur energy demand, analysts said.

Crude oil had won support "on speculation that the global economic stimulus efforts and production cuts by OPEC may slow growth in world stockpiles of the fuel", said BetOnMarkets analyst Dave Evans.

Markets had also shrugged off North Korea's launch on Sunday of a long-range rocket, which passed over northern Japan without incident, they said.

Oil prices had risen sharply after the Group of 20 London summit on Thursday stoked hopes of an economic upturn and rising demand for raw materials.

But markets were overshadowed somewhat on Friday by news that the US unemployment rate jumped to a fresh 25-year high of 8.5 per cent in March as recession-battered employers shed another 663,000 jobs.

A spreading worldwide recession has ravaged energy demand and slashed oil prices from their record peaks of above $US147 last July.

The Organisation of the Petroleum Exporting Countries (OPEC), which pumps 40 per cent of world oil, had opted last month to leave production quotas unchanged because of the global economic slowdown.

Late last year, the 12-nation cartel had slashed its output by a total of 4.2 million barrels a day as it sought to halt the slide in oil prices.