Benchmark crude for June delivery was down 95 cents to $49.19 a barrel by midday in Singapore, in electronic trading on the New York Mercantile Exchange. The contract Monday fell $1.41 to settle at $50.14.

Swine flu has killed up to 149 people in Mexico and cases have been reported in the U.S. and Canada. Authorities around the world have stepped up precautions, with many international airports checking passengers coming from Mexico and the U.S. for signs of flu.

"If it restricts travel and keeps people at home, it would have implications for all asset classes," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. "It has potential to be huge, but it could also be quickly contained."

Oil has traded close to $50 a barrel for the past month as investors struggle to forecast when the global economy may recover from its worst slowdown in decades.

Traders will be watching the weekly petroleum inventory data from the Energy Information Agency on Wednesday. Analysts expect a build of 1.8 million barrels in crude stocks, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. Crude stocks already are near 19-year highs.

"Crude has been really range-bound for a while," Moltke-Leth said. "Inventories are extremely high, and we’re probably not going to see smaller supplies any time soon."