Oil prices dip continue to hover above US$62 a barrel

25-Dec-06

Light sweet crude for February delivery slipped by 25 cents to settle at US$62.41 on the New York Mercantile Exchange. Oil prices fell in pre-holiday trading on Friday, but held above US$62 a barrel on concerns of slower economic growth coupled with expectations of a mild winter and OPEC's production cut planned for February to tighten worldwide supplies. Weather forecasts estimate that temperatures in the Northeast of USA, an area of high demand for heating fuel and natural gas, will remain above normal through the first week of January. However, the relatively high price of crude oil, despite warm weather and slowing economic growth, signifies the market's elasticity and anticipation of looming tightness early next year. OPEC's decision to reduce output by an additional 500,000 bpd in February follows a previously announced cut of 1.2 million bpd. U.S. crude inventories plunged by 6.3 million barrels last week from the previous week -a much greater than expected drop, triggered partly by fog-related shipping disruptions along the Gulf Coast that have since been cleared up.