Oil prices at lowest level since 2005 |
Oil prices traded at their lowest levels since mid-2005 in Asian hours Friday as the market reacted to high US stockpiles and unusually warm winter weather, dealers said.
At 10:32 am (0232 GMT) New York's main contract, light sweet crude for delivery in February, was down 14 cents to 55.45 dollars a barrel from 55.59 dollars in late US trade when the contract sank 2.73 dollars.
The contract had not fallen as low in Asia since June 2005 when it was below 54 dollars.
Brent North Sea crude for February was at 55.25 dollars after plunging 2.85 dollars overnight to a low of 54.76 dollars, its lowest level since December 1, 2005.
"The short-term negative driving factor remains the warmer weather in the Northern hemisphere and North Asian countries like Korea and Japan," said Victor Shum, senior rincipal at Purvin and Gertz Inc in Singapore.
Crude prices have tumbled in the new year as unseasonably warm weather curbs demand for heating oil in the northeast United States, the world's biggest energy consumer.
"The market is also reacting to the bearish US inventory data showing a rise in distillates and oil reserves," Shum said after the latest US weekly report on stockpiles.
US stockpiles of distillates, which includes heating fuel, rose by two million barrels to 135.6 million barrels in the week ending December 29, compared with forecasts for a gain of 850,000 barrels.
Crude oil inventories dropped 1.3 million barrels to 319.7 million -- less than the anticipated 2.0-million-barrel decline.
Gasoline (petrol) reserves rose 5.6 million barrels to 209.5 million, almost four times market expectations for a rise of just 1.5 million barrels.
"The fact that distillates rose in the first week of January was significant and goes back to lack of winter fuel demand," Fimat analyst John Kilduff said.
The slump in prices has extended from the end of last year despite efforts by the Organization of the Petroleum Exporting Countries (Opec) to cut production and lift prices.
Shum said the market is testing Opec's resolve to cut production by an additional 500,000 barrels per day in February.
The US National Weather Service has said demand for heating oil will be about 33 percent below normal this week.
Shum said that with crude oil prices dipping about nine to 10 percent in just two to three days, investors have been pulling out of the commodities market.
"The weather remains the wild card in the market, with no geopolitical tensions driving the market at the moment," Shum said.
"But geopolitical tensions like the unresolved Iranian nuclear issues and Iraqi turmoil may re-emerge," he added.