Posted by By Jiwon Chung on
Oil prices tumbled more than 1 percent to below $58 a barrel in post-holiday trade on Tuesday, pressured by warmer than usual weather across the United States and a recovery in crude production from OPEC member Nigeria.
Oil prices tumbled more than 1 percent to below $58 a barrel in post-holiday trade on Tuesday, pressured by warmer than usual weather across the United States and a recovery in crude production from OPEC member Nigeria.
February crude futures fell 72 cents to $57.71 a barrel in light trade, having gained 15 cents on Friday. The New York Mercantile Exchange (NYMEX) was closed on Monday.
Natural gas futures led the decline, plunging 7 percent to $11.42 per million British thermal units (mmBtu), extending last week's sharp decline.
"The market is led by natural gas now," said Keiichi Sano, assistant manager at Sumitomo Corp.'s commodity business unit.
"Natural gas is weak because of warm weather in the United States and it is pulling down crude prices. I don't think (crude oil prices) would recover unless we have chilly weather."
Overall U.S. heating fuel demand is forecast to be 27.7 percent below normal in the week to December 31, with heating oil demand in the key consuming Northeast region about a quarter less than usual, the National Weather Service said in a forecast.
Current conditions in the Northeast -- the world's biggest heating oil market -- are 13-23 degrees Fahrenheit warmer than normal, according to The Weather Channel Web site (www.weatherchannel.com).
Natural gas futures soared to record highs in mid-December as frigid conditions hit the U.S. Midwest and Northeast, fuelling demand and pushing up oil prices as some consumers and industries can switch between the fuels, depending on price. Natural gas futures have since plunged by a quarter from those peaks.
Oil prices were also undermined by news that Royal Dutch Shell's (RDSa.L) had managed to restore most of its production in Nigeria after unknown gunmen attacked two pipelines on December 20, setting off a huge blaze and oil slick.
A company spokesman said that the firm was only losing 15,000 barrels per day (bpd) of output on Monday, down from 180,000 bpd earlier. Shell's force majeure on Bonny Light exports, a technical release from honoring contracts, was still in place.
Chinese data from Monday also put a damper on the market as it showed that oil demand was basically flat in November, halting several months of strong growth and dimming hopes for a year-end rebound in consumption from the world's No. 2 user.
Implied oil demand rose just 0.1 percent from a year ago in November to 6.42 million bpd, according to Reuters calculations based on official government data. Demand in the year through November was up 3.3 percent from 2004, in line with forecasts.
Crude prices are up a third from the start of the year, but sharply lower than the $70.85 a barrel peak touched on August 30, when Hurricane Katrina ripped though U.S. Gulf of Mexico oil platforms and tore into coastal refineries.
The market has traded between $56 and $61 for most of the past two months, prompting speculators to scale back bets that prices would carry on falling.
Noncommercial crude oil speculators -- which had amassed their biggest short positions in two-and-a-half years in mid-November