NEW YORK – Predictions for mild weather across the Northeast sent crude futures sliding below $57 a barrel Monday as the warmer-than-usual climate quelled worries about greater fuel demand this winter.
Light, sweet crude for January delivery on the New York Mercantile Exchange dropped $1.86 to $56.85 a barrel. In London, January Brent crude also fell 64 cents to $54.37 a barrel on the ICE Futures exchange.
Monday's decline follows an upswing in oil and gas prices last week as meteorologists tracked a winter storm that was expected to dump rain and snow on the northeastern states, the world's biggest market for heating oil, over Thanksgiving weekend.
But AccuWeather forecast rising temperatures Monday after the cold front moved through the region, calming fears of heating oil supply shortages. Last week, the government also reported that energy stockpiles were expanding as demand held steady.
"The market's reacting to forecasts that heating oil demand will be 20 percent below normal this week, giving refiners a little breathing room to boost supply ahead of winter," said commodities strategist David Thurtell of Commonwealth Bank of Australia in Sydney.
On the Nymex, heating oil slipped 5.4 cents to $1.635 a gallon, gasoline lost 4 cents to $1.42 per gallon and natural gas was off 7 cents at $10.92 per 1,000 cubic feet.
Oil officials tried to reassure the market that global stocks were adequate to support increased usage. Saudi Arabian Oil Minister Ali Naimi said the market remains balanced and that inventories are "comfortable" for consuming nations.
Kuwait Energy Minister Sheik Ahmed Fahd Al Ahmed Al Sabah, president of the Organization of Petroleum Exporting Countries, said late Sunday that his country saw no need to cut production "at the moment," and that current oil prices were "suitable for all." OPEC meets in Kuwait on Dec. 12.
But experts warned oil prices could spike in the event of a cold blast in the northeastern U.S. or other major fuel consumers in the Northern Hemisphere and said the market was eyeing the weather closely.
Analysts also said to expect a firm floor under prices as concerns remain over the recovery pace at U.S. Gulf of Mexico oil and gas facilities hit by hurricanes Katrina and Rita, which limited refining capacity in the region and had sparked fears of shortages this winter.