Oil Prices Fall Below $59 a Barrel
Crude oil prices opened the new year by plunging 4.5 percent as persistent mild weather in the United States led traders to bet on lagging demand for heating fuels.
Light, sweet crude for February delivery fell $2.73 Wednesday from Friday's settlement price to a six-week low of $58.32 a barrel. It was the biggest one-day drop since Aug. 17, 2005, when crude fell $2.83 to settle at $63.25 a barrel.
Temperatures in New York City were in the 10 Celsius on Wednesday, and are expected to surpass 15 C over the weekend. Forecasters are saying the warmer-than-normal temperatures in the Northeast United States — the biggest heating oil-consuming region — will continue through January.
That's going to put heating oil distributors around the country in pretty bad shape.
With the new drop, prices are starting to near the levels reached late in 2006. If those are breached, they can fall a long way.
On Nov. 17, the crude contract had closed at $55.81 a barrel, the lowest settlement since June 15, 2005.
Crude has not settled above $64 a barrel since September in what has become an increasingly weather-driven market: Oil surged to $70 a barrel for the first time in 2005 as Hurricane Katrina ravaged the Gulf Coast, broke above $78 a barrel in July 2006 on fears of another bad storm season, and then sank to $60 a barrel when those expectations were not met.
Analysts are split on whether crude prices will stay below the 2006 average of about $66 a barrel or rise to new heights this year. Arguments for the latter forecast include ballooning energy demand in some parts of the world, including China; threats of production cuts by the Organization of Petroleum Exporting Countries; and ongoing political turmoil in oil-producing regions, such as Nigeria and the Middle East.
It was unclear if Wednesday's sharp decline will mark the beginning of a long-term downtrend, or merely short-term weakness. Evans said prices have the potential to rebound, given that at this time last year oil surged amid worries about violence in Nigeria and Iran's nuclear capabilities.
Both of those situations are somewhat more critical today than they were a year ago.
Light, sweet crude for February delivery fell $2.73 Wednesday from Friday's settlement price to a six-week low of $58.32 a barrel. It was the biggest one-day drop since Aug. 17, 2005, when crude fell $2.83 to settle at $63.25 a barrel.
Temperatures in New York City were in the 10 Celsius on Wednesday, and are expected to surpass 15 C over the weekend. Forecasters are saying the warmer-than-normal temperatures in the Northeast United States — the biggest heating oil-consuming region — will continue through January.
That's going to put heating oil distributors around the country in pretty bad shape.
With the new drop, prices are starting to near the levels reached late in 2006. If those are breached, they can fall a long way.
On Nov. 17, the crude contract had closed at $55.81 a barrel, the lowest settlement since June 15, 2005.
Crude has not settled above $64 a barrel since September in what has become an increasingly weather-driven market: Oil surged to $70 a barrel for the first time in 2005 as Hurricane Katrina ravaged the Gulf Coast, broke above $78 a barrel in July 2006 on fears of another bad storm season, and then sank to $60 a barrel when those expectations were not met.
Analysts are split on whether crude prices will stay below the 2006 average of about $66 a barrel or rise to new heights this year. Arguments for the latter forecast include ballooning energy demand in some parts of the world, including China; threats of production cuts by the Organization of Petroleum Exporting Countries; and ongoing political turmoil in oil-producing regions, such as Nigeria and the Middle East.
It was unclear if Wednesday's sharp decline will mark the beginning of a long-term downtrend, or merely short-term weakness. Evans said prices have the potential to rebound, given that at this time last year oil surged amid worries about violence in Nigeria and Iran's nuclear capabilities.
Both of those situations are somewhat more critical today than they were a year ago.
posted by Ottawa Gas Prices | 5:05 PM
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