Oil drops below $49 after ECB announces bond buying

ECB President Mario Draghi said the bank would buy 60 billion euro of government bonds a month

Brent crude oil fell below $49 a barrel on Thursday after the European Central Bank (ECB) said it would start buying government bonds, a move which could push the dollar to new highs and put downward pressure on commodities.

Exceeding market expectations, ECB President Mario Draghi said the bank would buy 60 billion euro ($69.34 billion) of government bonds a month until the end of September 2016 to support the flagging euro zone economy.

Brent crude futures traded at $48.85 a barrel by 1415 GMT, down 18 cents. U.S. crude was down 48 cents at $47.30. Earlier in the session, Brent had reached a high of $50.45, up $1.42.

"The ECB bond buying programme was larger than expected," said Olivier Jakob, oil analyst at Petromatrix in Zug, Switzerland. "It was largely priced in."

Jakob said the ECB decision would put further pressure on oil prices which have already more than halved since June last year due to oversupply in world markets:

"Long term it is going to be positive for the dollar so negative for oil. The question then is, at the current oil price, can the dollar push oil even lower?"

Expectations for the stimulus programme have pressured the euro and sent the dollar, seen as a safe haven, soaring.

A strong dollar, buoyed by an expected U.S. interest rate hike and an American economy that is growing while Europe and Asia slow, dents demand for dollar-priced commodities by making them expensive for holders of other currencies.

In a formation known as a "contango", Brent crude prices for delivery this March are $10 a barrel cheaper than those for March 2016, making it attractive to buy oil now and put it into storage for sale later, traders say.

Energy Aspects oil analyst Virendra Chauhan said prices were likely to rise in the second half of 2015 and lower supply fuels global demand.

"I think you will start seeing the effect of lower supplies from Q2 15," Chauhan told Reuters Global Oil Forum. "Overall, we think that, led by Asia, global oil demand has (already) started to pick up."

Analysts expect U.S. crude stocks to have increased by roughly 2.6 million barrels in the last week, further depressing oil prices. Data from the U.S. Department of Energy's Energy Information Administration (EIA) will be released at 1600 GMT Thursday.