By Joe Brock
LONDON (Reuters) - Oil prices eased toward $49 a barrel on Tuesday, paring earlier gains after U.S. stock markets rose following encouraging housing and consumer confidence data.
Investors were cautiously awaiting the latest indication of oil supply with the weekly inventory report from the American Petroleum Institute (API) due to be released later on Tuesday.
U.S. oil futures fell 98 cents to $49.16 a barrel by 1507 GMT (11:07 a.m. EDT), off an earlier low of $48.55. London Brent crude was down 92 cents at $49.40.
Some analysts have cautioned that oil prices could pull back from current levels in the near term as demand remains weak and fundamentals do not support higher prices.
Reflecting still-weak demand, U.S. crude stocks probably rose 2.2 million barrels last week, a preliminary Reuters poll showed.
The poll also forecast a 300,000 barrel decrease in gasoline stocks and a 300,000 barrel build in distillate stocks ahead of API data released later on Tuesday.
U.S. stocks rose mildly in early trading on Tuesday after European and Asian markets lost ground, knocked by growing fears about the economic impact of the swine flu outbreak.
Airline stocks were among the hardest hit as flu concerns were expected to reduce passenger numbers. This would result in a fall in demand for fuel, adding pressure on oil prices.
Analysts drew comparisons between the current health scare and the SARS epidemic in 2003, which sharply reduced fuel demand and sent the U.S. oil price tumbling over 20 percent in a week.
Investment bank J.P. Morgan noted that during the SARS scare, global air passenger travel fell 8.2 percent during the second quarter of the year, and over 19 percent in Asia alone.
Oil major BP reported a 62 percent fall in first-quarter net profit on Tuesday due to a collapse in oil and gas prices, but heavy cost cutting helped it beat analysts' expectations.
BP said it recorded a 2 percent rise in oil and gas production to 4.02 million barrels of oil equivalent per day, the first time the company topped the 4 million level since the second quarter of 2006.
Nexen Inc's
(Editing by James Jukwey)
