Oil prices fell sharply yesterday on speculation that rising temperatures in the US would trigger a fall in fuel consumption.
The price of crude for delivery in February fell 73 cents, or 1.3 per cent, to $57.70 a barrel on the New York Mercantile Exchange. In London, Brent crude futures fell by more than $1 to $55.65 while natural gas prices plunged more than 10 per cent.
Prices are well down on the all-time record $70.85 a barrel hit on 30 August, the day after Hurricane Katrina struck Louisiana and Mississippi, although they are still 40 per cent higher than a year ago.
The National Weather Service said higher-than-normal temperatures would cover most of the US from New Year's Day to 9 January. According to AccuWeather.com, temperatures in most of the US apart from the North-west will be higher than normal in the next six to 10 days.
"This warm weather is lowering demand for natural gas and heating oil," Jason Schenker, an economist at Wachovia bank, told Bloomberg. "What the market does is all in the hands of the weatherman."
The US North-east - the world's biggest heating oil market - was 13F to 23F warmer than normal on Sunday, according to The Weather Channel website.
Natural gas futures soared to record highs in mid-December as frigid conditions hit the Midwest and North-east, fuelling demand and pushing up oil prices as some consumers and industries can switch between the fuels, depending on price. Natural gas futures have since plunged by one-quarter from those peaks. Oil and natural gas prices often move in tandem because as much as one-tenth of US factories and power plants can switch between burning oil and gas.
Oil prices were also undermined as Royal Dutch Shell said it had restored most of its production in Nigeria after attacks on two pipelines last week triggered a huge blaze and oil slick. Shell said it was losing only 15,000 barrels per day of output on Monday, down from 180,000 bpd earlier.Reuse content