Oil retreats below $52 as stock markets turn red

Oil prices retreated to below $52 a barrel Monday, tracking a downturn in stock markets, as investors worried about the upcoming U.S. corporate earnings season and the failure of a major takeover deal.

By mid-afternoon in Europe, benchmark crude for May delivery was down $1.17 to $51.34 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 13 cents on Friday to settle at $52.51.

In London, Brent prices fell 95 cents to $52.52 a barrel on the ICE Futures exchange.

Earlier Monday, the Nymex contract had risen as high as $53.60 as investors sought to ride the momentum from a two-month rally in crude prices on expectations that the U.S. recession may be bottoming out.

But renewed worries about more troubles in the banking sector and the apparent collapse of IBM Corp.'s $7 billion acquisition of Sun Microsystems Inc. pushed European stock markets into the red and pointed to a lower opening on Wall Street.

Crude has jumped from below $35 a barrel in February as investor concerns have eased that the ailing U.S. economy would enter a depression and drag the rest of the world with it. Traders will be watching corporate earnings announcements for signs the recession may have bottomed in the first quarter and for company guidance about coming quarters.

Aluminum producer Alcoa Inc. is set to kick off the first-quarter earnings season on Tuesday.

Still, some traders are skeptical whether oil demand that's reeling from a global recession can justify much higher crude prices.

"The good feeling is hanging on, but I still think this is a bear-market rally," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. "I think crude is going to see some pretty firm resistance around $55, then go back down to the low $40s."

Investors were cheered last week by the G-20 meeting in London, where leaders agreed to avoid protectionist measures during the economic crisis. The nations also pledged more than $1 trillion to combat the global financial crisis.

"The underlying sentiment after this meeting was pretty positive," Moltke-Leth said. "Compared to the depression of the 1930s, the international community is showing that it is committed to working together."

U.S. energy consultancy Cameron Hanover said several factors were contributing to the oil market gains.