Oil falls a second day on concern swine flu will curtail travel

TOKYO (Bloomberg) -- Crude oil fell for a second day, dropping below $50 a barrel, on concern that the swine-flu outbreak will curtail travel and delay a recovery from the global recession.

Oil, gold and copper declined as the World Health Organization raised its global pandemic alert to the highest since the warning system was adopted in 2005, saying the disease is not containable. A report tomorrow will probably show U.S. crude supplies rose last week by 1.8 million barrels from their highest since September 1990, according to a Bloomberg survey.

“Risk aversion has kicked in amid fears over the outbreak of swine flu,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “The sell-off will probably calm down as we get closer to the inventory data, but the data will likely be bearish and add a little more pressure.”

Crude oil for June delivery fell as much as $1.59, or 3.2 percent, to $48.55 a barrel in electronic trading on the New York Mercantile Exchange. It was at $48.88 a barrel at 11:25 a.m. London time. Prices are up 9.4 percent this year.

Other commodities dropped on concern that the swine flu outbreak will exacerbate the economic slowdown. Copper fell, touching a two-week low.

Copper for three-month delivery on the London Metal Exchange lost as much as 4.2 percent to $4,163 a metric ton. Gold bullion for immediate delivery lost as much as 1.6 percent to $891.95 an ounce.

---------------Rough skies for airlines

Airline stocks tumbled worldwide. U.S. carriers reported some cases of suspected flu-like symptoms to health authorities, the Air Transport Association trade group said. The U.S. Centers for Disease Control and Prevention recommended that nonessential travel to Mexico be avoided.

Airline travel in Asia fell after the outbreak of Severe Acute Respiratory Syndrome in 2003.

“There’s a risk that the flu scare will hit international aviation travel, which would have a negative impact on demand for jet fuel,” said Eugen Weinberg, analyst at Commerzbank AG in Frankfurt. “Oil prices should continue to fluctuate around the $50 level, with short-term risks being skewed to the downside.”

The dollar increased against the euro for the first time in a week on speculation the European Central Bank will lower interest rates at its meeting next month. The U.S. currency traded at $1.3038 to the euro on Monday after moving 1.6 percent higher on Tuesday, limiting the appeal of dollar-priced commodities such as crude oil as an alternative investment.

Brent crude for June settlement fell as much as $1.44, or 2.9 percent, to $48.88 a barrel on London’s ICE Futures Europe exchange.

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