Light, sweet crude for February delivery settled at US$55.64 a barrel on the New York Mercantile Exchange, after plunging as low as US$53.88 in earlier electronic trading. Tuesday was a volatile day of trading, wherein oil prices sank to 18 month lows on expectations for more mild weather and selling by large investment funds. Oil market trimmed losses to settle above US$55 on Tuesday, even as crude prices have plummeted nearly 9% this year. Market watchers expect to see larger U.S. petroleum inventories in this week's government report on Wednesday as warmer than normal winter continues in the Northeast, curbing demand for heating fuels in the world's largest heating oil market.
Large investment funds, that helped drive oil to record highs in 2006 and held long positions (those that expected prices to rise), have been exiting the market since prices began their downward spiral, fueling the decline. When oil prices fall, it becomes more expensive for long-term investors to hold their positions. Oil contracts expire each month, and investors must pay a fee to roll over the contract. That cost becomes relatively more expensive when oil prices are declining.
10-Jan-07 
{{comment.DateTimeStampDisplay}}
{{comment.Comments}}