Oil slides below $49, nearing three and a half year low

SINGAPORE: Oil extended its sharp drop to below $49 a barrel on Tuesday, nearing a 3-�� year low after OPEC's decision to leave output unchanged sent it tumbling a day ago and as gloom about the global economy grew.

Japan's Nikkei average slid 5 percent on Tuesday, with exporters hit by a stronger yen after signs the U.S. economy has been in a recession for a year heightened risk aversion. U.S. light crude for January delivery fell 53 cents to $48.75 a barrel by 0056 GMT, following Monday's over 9 percent dive to the lowest settlement since May 2005.

Oil now hovers near the $48.25 a barrel intra-day low it touched on Nov. 21. London Brent crude dropped 47 cents to $47.50. Surging demand from emerging countries sent oil on a six-year rally from 2002, but prices have tumbled since July's all-time high above $147 a barrel as economic turmoil erodes demand in top consumer the United States and other big developed nations.

Producer group OPEC on the weekend put off a decision on whether to deepen production curbs until later this month as Saudi Arabia and other Gulf members called for greater compliance, a delay that sent oil prices tumbling on Monday.

More bearish news could be in store on Wednesday, with U.S. crude oil inventories likely having risen by 1.8 million barrels last week, a third consecutive build, as imports continued to increase, a preliminary Reuters poll of analysts showed.

"While some price consolidation above last month's lows of $48.25 could be forthcoming (on Tuesday), we will be looking for Wednesday's EIA report to provide additional fodder for the bears," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.