Oil plunged below $52 a barrel Thursday to its lowest price since May 2005, extending a sharp decline that has been led by dampened heating oil demand, but which could save consumers money on a more widely used fuel: gasoline.

Crude oil has tumbled by 15 percent so far this year in a huge sell-off that was kicked off by investment funds last year, and then stoked by a historically warm U.S. winter that has left supplies of heating fuel barely touched.

Global Insight energy analyst Kevin Lindemer said that typically, for every dollar the price of crude goes down, you'll see a corresponding 2-2.5 cent drop in prices at the gas pump.

With crude down by around $9 from December, drivers should be paying about 20 cents less per gallon in a month or so, he said, if crude prices hold at current levels. The average U.S. retail price of gasoline was $2.281 on Thursday, down a cent from a month ago, according to AAA.

Of course, the energy markets are volatile, and if crude bounces back up to $60 a barrel, pump prices wouldn't budge much.

On Thursday, trading was choppy, with crude declining in pre-market electronic trading, rising to nearly $55 a barrel in morning trading, and then plummeting to settle below $52. Factors that could cause oil to rise again are the possibility of escalating tension in the Middle East, growing global energy demand, violence in Nigeria and production cuts by OPEC.

"The impact of the weather should not be overstated. Heating demand is a comparatively small part of global consumption," said Antoine Halff, an energy analyst at Fimat. "There's potential for a rebound."

Light, sweet crude for February delivery dropped $2.14 to settle at $51.88 on the New York Mercantile Exchange, after dropping as low as $51.80. It was the lowest settlement price since May 27, 2005 when the front-month crude contract closed at $51.85.

The National Oceanic and Atmospheric Administration said Thursday that it expects warmer-than-normal weather in the Northern United States to continue through March. This winter has caused a glut in petroleum products; on Wednesday, U.S. government data showed big increases in domestic gasoline and heating oil inventories.

Adding to the price slide Thursday was the resumption of oil shipments through Belarus to other parts of Europe, and the belief that the Organization of Petroleum Exporting Countries won't announce another production cut just yet to stall the market's drop.

OPEC decided late last year to reduce production by 1.2 million barrels of oil a day starting last November, and 500,000 barrels a day set to begin Feb. 1.

Halff said because the cuts started in November, they haven't fully hit the market yet, but he said estimates based on shipping reports and confidential sources indicate that out of the 1.2 million barrels a day OPEC promised to cut, around 800,000-900,000 barrels were actually cut.

It's hard to say where the oil market is headed: up to the $60-a-barrel level it had been hovering at since September until recently, or down to the $40-a-barrel level of two years ago.

Large speculators, mostly commodity funds, have been betting prices will keep falling, while commercial accounts — companies that deal with oil in their business and use the market to hedge losses — have largely bet on a rebound.

Last week, large speculators added more than three times as many short positions (bets that prices will fall) than long positions (bets that prices will rise), and commercials added nearly twice as many long positions as shorts, according to Nymex data.

"Funds seem to be selling as aggressively as they once had bought. They have accumulated a large line of shorts, and it continues to grow," wrote Peter Beutel of Cameron Hanover in a research note. "Commercial accounts were buying, but they also sold new shorts. There was no long liquidation and that could lead to huge losses for longs who have not yet taken losses. They seem to have doubled up their long positions, which could be deadly."

Halff said funds began liquidating long commodity positions in September because commodity indexes had shown meager annual profits. The liquidation trend snowballed and has come to a head now, the first quarter of 2007, as large institutional investors shift their strategies.

"They're not leaving the market, because commodities are still attractive ... Rather, we will see them come in and out of the market much more frequently," Halff said.

Crude oil's steep decline follows an eight-year bull market, which led oil from a low of $10.35 a barrel in 1998 to a record high above $78 last summer.

In Nymex trading, heating oil futures dipped 4.51 cents to settle at $1.4804 a gallon. Gasoline futures fell 3.87 cents to settle at $1.3905 a gallon. Natural gas prices dipped 46.3 cents to settle at $6.292 per 1,000 cubic feet, after the U.S. Energy Information Administration said natural gas in storage fell by 49 billion cubic feet — around what most analysts were expecting.