Oil prices drop below USD 55 a barrel
Warm winter weather in US contributes to higher-than-expected inventories of gasoline, heating oil and diesel fuel
Light, sweet crude for February delivery dropped 60 cents to USD 54.99 a barrel in electronic trading on the New York Mercantile Exchange at midday in Europe, after falling as low as USD 54.90 — the lowest price in 19 months.
The contract on Thursday fell USD 2.73, or 4.7 percent to settle at USD 55.59 a barrel — the lowest settlement price since June 15, 2005. The drop followed a 4.5 percent decline Wednesday.
February Brent crude on London's ICE Futures exchange fell 24 cents to USD 54.87 a barrel — a 13-month low.
Ministers of the Organization of Petroleum Exporting Countries are waiting to see whether the lower price trend continues before taking any further action, the chairman of Libya's oil company said Friday.
"We are concerned — of course," Shokri Ghanem told Dow Jones Newswires from Tripoli. "We need to see if this trend continues as it has only been for two days so far."
Weather an increasingly important factor
Oliver Stevens at IG Markets said the price could rise again if it steadies near the current level.
However, he said, "Should the USD 55 per barrel support level be broken oil may well trade well down only to find support at the USD 50 level."
"The big negative factor driving the oil market is really the warm winter weather in the US Northeast," said Victor Shum, an analyst with Purvin & Gertz in Singapore. "The US inventory report has also fueled the selling in oil, and it is continuing this morning."
US crude inventories declined last week by 1.3 million barrels to 319.7 million barrels compared with the previous week, the Energy Information Administration reported Thursday. Analysts on average had expected crude stocks to rise by 930,000 barrels, according to a survey by Dow Jones Newswires.
However, distillate inventories, which include diesel fuel and heating oil, increased by 2 million barrels to 135.6 million barrels as warm winter weather hurt demand. Distillate stocks were expected to increase by an average of 1.15 million barrels.
Weather has become an increasingly important factor in the price of oil in recent years. A warm winter and a mild hurricane season last year have combined with a forecast for warmer-than-normal temperatures this winter to put downward pressure on oil prices.
In other Nymex trading, heating oil futures fell 0.61 cent to USD 1.5370 a gallon while natural gas prices fell 3.2 cents to USD 6.130 per 1,000 cubic feet.
