PERTH - Oil fell more than 2 percent to hover near US$51 a barrel on Monday, extending the previous session's losses, as a bleak near-term energy demand outlook prompted investors to take profit on its recent rally.

Analysts say the U.S. government's rejection of turnaround plans for troubled automakers GM and Chrysler also dampened investors' sentiments and encouraged further sell off.

U.S. oil for May delivery fell US$1.14 to US$51.24 a barrel by 0526 GMT. The contract fell US$1.96 to settle at US$52.38 a barrel on Friday, pulling back from Thursday's four-month high.

London Brent crude fell 95 cents to US$53.07.

"The rejection of the turnaround plans has led to a pick-up in risk aversion, which explains why oil is falling further," said Michelle Kwek, an analyst at Informa Global Markets in Singapore.

Asian shares and U.S. stock futures slumped on Monday, while safe-haven U.S. Treasuries gained after the Obama administration's autos task force rejected turnaround plans for GM and Chrysler, which raised the prospect of bankruptcies that could further debilitate the already ailing U.S. economy.

Analysts said a recent strengthening of the U.S. dollar, which rose against other major currencies on Monday, also added downward pressure on oil prices.

Oil is up about 14 percent since the start of the month and is looking for its biggest monthly gains since October 2007, thanks to rallying stock markets and tightening oil supplies as the Organization of the Petroleum Exporting Countries (OPEC) curbs exports.

"The overall demand outlook, at least in the short term, continues to look quite bleak. The rally seen in the last two weeks might perhaps have ran its course," said Toby Hassall, head of research at Commodities Warrants Australia.

Industrial output from Japan, the world's No. 3 energy consumer, fell by a greater-than-expected 9.4 percent in February, as weak demand weighed on an economy mired in its worst recession since World War Two, but factories forecast a small rise in production in coming months.

Also casting a pall over oil prices were comments on Sunday from the Organisation for Economic Cooperation and Development (OECD) that unemployment was set to reach double digits in many developing and advanced countries.

Still, analysts said hopes that the U.S. economy had finally turned a corner were offering some underlying support for oil, keeping prices above the psychologically important $50-level.

President Barack Obama said in an interview published on Sunday that he saw "glimmers of stabilization" in some areas of the U.S. economy, including pockets of the domestic housing market.

U.S. crude oil had hit its highest level so far in 2009 on Thursday at US$54.66 a barrel on expectations that U.S.

government efforts to tackle bad debts and reflate the economy would help boost oil demand.

But prices fell on Friday as the U.S. stock market succumbed to profit taking and banks hinted that March had been a tougher month than the previous two. --REUTERS