NEW YORK – Crude futures dropped by more $2 a barrel on Monday as traders anticipated warmer weather later in the week and responded to weekend snowstorms in the Midwest that kept motorists off the road and planes grounded.
Light, sweet crude for February delivery plunged $2.18 to $42 a barrel on the New York Mercantile Exchange (search) in late morning trade, recovering from a low of $41.76.
"That massive storm in the Midwest shut down gasoline demand and didn't do much for heating demand," said Ed Silliere, vice president of technical research at Energy Merchant Corp. (search) in New York.
Silliere said the weekend weather and expected warm spell later in the week come as a "stomach punch to anyone who was long," or betting that oil prices would rise.
"This is just a reaction to where the (London) market went on Friday," said Esa Ramasamy, oil editorial manager for energy reporting agency Platts in Singapore.
The world's largest earthquake in 40 years, which hit parts of Asia on Sunday, was so far not a factor, traders said, though it could depend on how badly ports and shipping lanes are affected.
London's International Petroleum Exchange (search) was closed and will reopen Wednesday. On Friday, Brent crude futures sagged 60 cents to $40.11 a barrel.
Over the past month, the energy market has zeroed in on the severity of the of Northern Hemisphere winter and the consequent strength of demand for oil products, especially heating oil, stocks of which are lower than at this time last year.
The Energy Department releases its next petroleum supply report on Wednesday.
The weather and stockpiles watch come after a year when crude costs were pushed to a series of record highs, as global demand remained robust while spare production capacity was reduced to multiyear lows.
At the same time, concern flared about supply disruptions in Russia, Nigeria, Venezuela and Iraq.
Crude futures prices peaked at more than $55 a barrel in October, but have since retreated as stockpiles have risen and as U.S. weather has so far remained relatively mild.