LONDON – Oil prices fell on Monday as warm winter weather curbed fuel demand in top consumer the United States, erasing gains made earlier after Russia halted some exports in a trade dispute.
U.S. crude settled down 22 cents to $56.09 a barrel, after moving between $55.10 and $57.72. London Brent fell 4 cents to $55.60 a barrel.
Oil futures are down more than 8 percent since the start of the year on weak demand for heating fuels and as big investment funds seek profits in other markets, worrying producer group OPEC as it attempts to buoy prices.
A senior OPEC delegate said members were holding consultations on possible further action after the cartel agreed to cut output 1.2 million barrels from November, and another 500,000 barrels from February.
"The fast and deep drop in the oil market in the last week is worrying oil producers," the delegate said.
Heating demand in the United States was forecast to average about 24 percent below normal for this time of the year, extending an abnormally warm start to the heating season, according to the U.S. National Weather Service.
The soft demand for heating oil and natural gas offset worries about Russian supply, after the world's second largest producer cut pipeline shipments to Belarus, impacting Poland and Germany.
Russia's pipeline monopoly Transneft said on Monday it was forced to act because Minsk had been siphoning oil from the pipeline. The Belarussian foreign ministry denied taking the oil illegally.
"Sentiment seems very bearish, especially among funds. We could be experiencing one of the warmest winters for many years and if that is the case it will have a sizeable impact on first quarter U.S. demand," said Frederic Lasserre, head of commodities research at SG CIB.
Investors were also sceptical of compliance among OPEC members in enacting the current cuts.
"Fundamentals are weak and the market is very wary about non-compliance from OPEC," said Christopher Bellew, an oil futures broker at Bache Financial in London.
A Reuters survey showed on Friday that OPEC had made little further progress in December in lowering supply to bolster prices, as higher output from some members offset continuing cutbacks by Saudi Arabia and others.
Supply from the 10 countries bound by output targets was 26.96 million bpd, up 60,000 bpd from November, the survey found on Friday. December supply was 680,000 bpd less than in October, just over half the cut OPEC pledged from Nov. 1.