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Oil prices fall back to 2005 levels in Asian trade
AFP
SINGAPORE
Petroleumworld.com 01 09 07
Oil prices slid back to levels unseen since 2005 in Asian trade Tuesday as the market maintained its focus on mild winter weather in the northern hemisphere and high crude stockpiles, dealers said.
At 1:37 pm (0537 GMT) New York's main contract, light sweet crude for delivery in February, was at 55.60 dollars a barrel against 56.31 dollars in late US trade Monday.
Brent North Sea crude for February was at 55.07 dollars, down 53 cents after plunging in London trade to as low as 54.41 dollars, a level not seen since November 30, 2005.
Tony Nunan, of Mitsubishi Corporation's energy risk management in Tokyo, said two factors were influencing prices: "The warmer winter weather in the US and East Asia and high crude inventories."
He said the warmer weather was not helping inventories.
Crude futures slumped last week on falling US demand for heating fuel, which has been dented in recent weeks by unusually warm winter weather along the US east coast.
Some said the market has been dismissive of cold weather forecasts because of the ample supplies.
"The fundamentals that forced prices lower in the first place are still here -- mild weather and relative quiet on the geopolitical front," Mike Fitzpatrick, an analyst at FIMAT USA, said in US trading hours.
"There is enough supply. People are not really worried about colder weather," Fitzpatrick said.
Barclays Capital said in a research note that the drop in prices since the New Year seems out of proportion to the changes in the weather and inventories.
"It is certainly not the case that a warmer climate will necessarily result in sizeable declines in overall energy demand," it said. "The weakness in energy prices may reflect more macro concerns over the US economy."
Analysts said prices might gain some support on news that Russia's oil exports to Europe have been disrupted.
Russian oil exports to Germany and Poland through Belarus were cut Monday in a dispute highlighting the European Union's vulnerability to tension between Russia and its ex-Soviet neighbours.
Moscow said Belarus provoked the disruption by illegally siphoning off Russian oil but authorities in the ex-Soviet republic said oil was taken as a form of transit payment imposed on January 1 because Moscow had refused to pay.
"I think it has a fairly big impact but it will largely depend how long it will take to resolve the dispute," Nunan said.
The real key in turning the market around is further oil supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) cartel, said Nunan.
"OPEC has to get their act together and make further cuts to stop the fall before it gathers momentum. It is possible for them to increase the February supply cut from 500,000 barrels per day up to the range of 800,000 to one million," he said.
OPEC decided in December to cut output by 500,000 barrels per day (bpd) from February 2007 but did not apportion a quota for each of the 11 members, which includes the world's biggest crude producer Saudi Arabia.
AFP 09 0600 GMT 01 07
Copyright© 2006 AFP .All Rights Reserved.
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