NEW YORK – Oil prices dropped more than 3 percent Tuesday, resuming the steepest slide in more than a decade as high inventories eased supply worries ahead of winter and countered concern over simmering geopolitical tensions.
U.S. light crude settled down $2.14 to $61.66 a barrel, the lowest in nearly six months. London Brent fell $1.88 cents to $62.17 a barrel.
Oil prices have tumbled around 20 percent over the past two months, the steepest fall since the Gulf War in 1991, as dealers focused on soaring commercial inventories in the United States, the world's biggest oil consumer.
"At some point OPEC will have to step up to the plate and say what price they'll want to defend," said Bill O'Grady, analyst at A.G. Edwards. Producer group OPEC has been pumping oil at its highest rate since the late 1970s.
U.S. distillate inventories, which include heating oil, are running at their highest in nearly seven years heading into winter, and analysts expect a light refinery maintenance season this autumn to further build those stockpiles. EIA/S
Crude inventories in the United States, meanwhile, are roughly 6 percent higher than a year ago, according to the latest government data.
Oil prices briefly pulled out of the nose dive since late last week, supported in part by news that BP was delaying production from its Thunder Horse oil platform in the Gulf of Mexico to 2008. The oil major's previous target called for the first oil output sometime in mid-2007.
The International Energy Agency said on Tuesday the delay in the field's start-up, caused by hurricane damage and equipment problems, will increase the world's demand for OPEC crude oil in 2007.
While energy prices remain in a tailspin, some see the weakness as temporary.
Angus McPhail of Alliance Trust investment company pointed to stronger prices further down the price curve, which stand at around $70 a barrel from the end of 2007.
"The forward curve is still indicating higher prices in the future," McPhail said, adding that current levels could be seen as a buying opportunity. "It's starting to look pretty good value," he said.
A major factor that could galvanize the market was geopolitical risk, he said.
Negotiations with OPEC-member Iran over its nuclear program appeared in flux this week as the U.S. envoy to the United Nations said Iran's chief negotiator, Ali Larijani, had not come to a major meeting in New York.
Europe's foreign policy chief said he would meet with Larijani in New York, however.
Washington says Iran is "playing for time" by delaying meetings and wants immediate sanctions, but world powers are still pushing diplomacy to end the impasse, which traders fear could affect supplies from the world's fourth biggest exporter.
President Bush told the General Assembly Tuesday that Iranian President Mahmoud Ahmadinejad is using Iran's resources to fund terrorists and pursue nuclear arms. Ahmadinejad will address the Assembly later Tuesday.