LONDON – Oil futures prices plummeted more than $1.60 barrel Monday as traders shrugged off news of a strike in Nigeria and entered a round of speculative selling.
U.S. light crude settled down $1.63 to $50.13 after diving as low as $49.30 a barrel on the New York Mercantile Exchange (search), breaking below $50 the first time in nearly a month. U.S. crude peaked a week ago at $55.67 a barrel.
In London, Brent crude lost $1.92 to $47.06 a barrel.
Aaron Kildow, a broker with Prudential Financial Inc. in New York, said Monday's drop was magnified by selling among institutional investors, like mutual funds, who had to cover earlier bets that prices would rise. Kildow also said that a burst of warm weather in the Northeast may have influenced market psychology.
December heating oil futures (search) plummeted 6.16 cents to $1.4025 per gallon on Nymex, where gasoline futures fell 3.8 cents to $1.2905 per gallon.
One of the factors in crude's decline Monday was speculation that a U.S. election win for Sen. John Kerry could ease the geopolitical friction that has helped fuel this year's record-breaking rally.
Energy analysts said a win for Kerry in Tuesday's U.S. presidential election could mean lower crude prices than if President Bush were reelected. Latest opinion polls can barely separate the two.
PFC Energy in Washington said a Bush win could stoke nervousness about U.S. policies in the oil-producing Middle East, while Kerry is seen as more likely to work through diplomatic channels.
"Under a Kerry administration we'd likely have a much more interventionist SPR policy," said Jamal Qureshi, market analyst at PFC. "And when you look out a bit further, Bush is more likely to be aggressive in the Middle East, particularly in Iran."
The Bush administration continues to add crude to the SPR, the national strategic petroleum reserve (search).
Kerry says he would stop filling the reserve at current prices to keep more crude on the market. That difference is important for a world oil market suffering a shortage of light, sweet crude, which makes up about 40 percent of the SPR.
"A Bush status quo results in somewhat higher oil prices both in the short and the longer term, in my view," said Tim Evans, senior analyst at IFR Energy Services.
PFC is forecasting an average U.S. crude price of $43 a barrel in 2005 should Kerry win, compared with $48 a barrel in the event Bush triumphed. It sees $52 on average in the first quarter 2005 under Bush compared with $45 under Kerry.
Traders also are wary of economic data showing signs that higher energy costs are eating into economic performance, curtailing oil demand growth.
A Reuters survey released on Monday showed growth in manufacturing slowed from the euro zone to Japan in October.
The surveys of manufacturers around the world showed a fall in manufacturing for the euro zone, the world's second largest economic bloc, signaling the slowest growth in 10 months.
"Primarily we suspect this is an oil-price-induced global downturn which is hitting export growth," said Chris Williamson, chief economist at NTC Research, which compiles the data for Reuters. "Secondly, there has been some evidence of demand cooling in China."
China's surprise decision last week to raise interest rates is thought unlikely to have a major impact on fuel demand from the world's second-biggest user, partly because retail prices remain heavily subsidized.
Last week, oil prices fell from record closing prices on Nymex after the Energy Department (search) said U.S. crude supplies had increased by 4 million barrels to 283.4 million barrels — roughly double what Wall Street was expecting. Also, data maintained by the Minerals Management Service (search) showed a significant recovery in industrywide oil and natural gas production in the Gulf of Mexico, where operations have been snagged since mid-September due to Hurricane Ivan.
Reuters and the Associated Press contributed to this report.