Oil prices fall as temperatures continue to rise

09-Jan-07

After briefly rebounding in early morning trade, oil prices declined on Monday, continuing the fall that had commenced last week, as heating oil supplies go unused due to mild weather in Northeast United States. Light, sweet crude for February delivery dropped to US$56.09 a barrel on the New York Mercantile Exchange, in a volatile session that saw crude rise as high as $57.72 and fall as low as $55.10.Earlier in the day, prices had briefly rebounded on reports that OPEC oil ministers are considering another cut, and worries of supply shortage in parts of Europe due to a dispute between Russia and Belarus. If OPEC announces another production cut, over and above the 1.2 million bpd reduction that began in November, and the 500,000 bpd cut set to begin Feb. 1, prices are likely rise. Still, OPEC's previous cuts haven't been able to keep crude prices above US$60 a barrel for long, mainly because many traders doubt that the cuts will be fully enforced. Forecast reports indicate that U.S. temperatures should return to normal over the next couple weeks. However, it will not be enough to make up for the recent run of historically warm weather, that have rendered U.S. supplies of crude and heating oil above normal for this time of year.