Crude oil futures nose-dived for a second day in a row Thursday, briefly dipping below $43 a barrel, as traders focused on rising fuel supplies and the lack of cold weather. The two-day drop of more than $5 a barrel picked up momentum from technical and speculative trading and revealed a psychological shift in the market.

The price of oil is now more than $12 below the peak set in late October, while retail gasoline prices have fallen by 9 cents over the past month to $1.95 per gallon nationwide.

"You will see (gasoline) prices drift lower between now and Christmas by some five to 17 cents a gallon," predicted Tom Kloza, director of Oil Price Information Service (search) in Lakewood, N.J.

After falling as low as $42.50 per barrel, light, sweet crude for January delivery settled at $43.25 per barrel, a decline of $2.24 on the New York Mercantile Exchange (search). It's the lowest settlement price since Sept. 10.

Heating oil futures (search) plunged 7.21 cents to $1.2572 per gallon on the Nymex, more than 33 cents below their October peak, and natural gas futures fell 60.2 cents to $6.811 per 1,000 cubic feet. Gasoline futures slid 5.98 cents to $1.1414 per gallon.

Petroleum prices have been high all year due to strong global demand, a tight supply cushion and fears of output disruptions in Iraq, Nigeria and Russia. In September, a strong hurricane knocked out significant oil production in the Gulf of Mexico, though the region's output is now recovering.

Plummeting oil prices over the past two days helped lift the stock prices of airlines such as AMR Corp. (AMR) and Northwest Airlines Corp. (NWAC), which have been financially bruised by expensive jet fuel. In contrast, shares of independent refining companies such as Valero Energy Corp. and Tesoro Corp. and oil-drilling services companies such as Noble Corp. and GlobalSantaFe Corp. fell.

The downward momentum in oil prices was fueled Thursday by a revised natural gas supply report from the Energy Department (search), which last week had mistakenly underestimated the amount of natural gas in storage. The sell-off in oil futures was also bolstered by comments from an OPEC official that the group is likely to keep production at current levels when it meets next Friday.

"It doesn't surprise me, to be honest, we've been looking for lower oil prices for some time," said Jason Kenney, an analyst at ING Financial Markets in London.

Oil prices plunged more than $3 a barrel, or 7 percent, Wednesday after the Energy Department reported that the nation's supply of distillate fuel, which includes heating oil, grew by 2.3 million barrels last week to 117.9 million barrels. Heating oil futures sank 8.90 cents, or 6 percent, on Wednesday.

U.S. crude oil inventories grew by 900,000 barrels last week to 293.3 million barrels.

Andrew Lebow, senior vice president at Man Financial Inc. in New York, said that while the nation's supply of heating oil remains tight for this time of year, the situation is not as dire as feared due to the relatively mild fall so far in the Northeast and Midwest, the main consuming regions for heating oil. "The need for that cushion becomes less and less," he said.

In London, Brent for January delivery was down $2.16 at $40.15 on the International Petroleum Exchange.

The downward pressure on prices was given a boost Thursday by a senior official of the Organization of Petroleum Exporting Countries (search) who said the cartel is unlikely to agree to an output cut when members meet Dec. 10 in Cairo to reassess their supply commitments.

"Cutting the production has a little chance," Maizar Rahman told reporters during a visit to Manila.

Analysts said the two-day collapse in oil prices could yet be reversed if the North American winter begins to bite.

"Don't forget that distillate stocks are still tight," said Marshall Steeves, an energy analyst at the New York-based brokerage Refco Group Inc. "There will be cold weather at some point in the Northeast."

Supply disruptions elsewhere could also put upward pressure on prices since the amount of excess production capacity worldwide is only slightly higher than daily demand.