SINGAPORE (AP) – Oil prices fell Wednesday on the continued mild winter in the U.S. Northeast and selling by large investment funds.
“We are seeing unfettered selling, any and all supportive factors are being ignored,” wrote John Kilduff, senior vice president for energy risk management at Fimat USA, in a research note. “Technical influences will now exert themselves as important support levels are broken.”
Light, sweet crude for February delivery dropped 11 cents to $55.53 a barrel in Asian electronic trading on the New York Mercantile Exchange, mid-afternoon in Singapore.
The contract shed 45 cents to settle at $55.64 a barrel Tuesday, paring its losses after plunging as low as $53.88 in earlier electronic trading. The front-month contract last fell that low in June 2005.
February Brent crude fell 12 cents to $55.06 a barrel on the ICE Futures exchange in London.
Analysts also said large funds that held long positions — those that expected prices to rise — have been exiting the market since prices began their downward spiral, exacerbating the decline. Crude prices have plummeted nearly 9 percent this year.
Winter in the U.S. Northeast has been warmer than normal, which has curbed demand for heating fuels in the world’s largest heating oil market. As a result, market watchers expect to see larger petroleum inventories in this week’s government report, due later Wednesday.
Crude inventories were expected to climb an average of 820,000 barrels. Petroleum product stocks are expected to increase for the fourth straight week. Distillate stocks, which include heating oil and diesel fuel, are seen rising by an average of 1.9 million barrels while gasoline stocks are projected to increase by 2.5 million barrels.
On Monday, crude oil prices rose as high as $57.72 on reports that OPEC oil ministers would consider another cut in output, and worries that a dispute between Russia and Belarus could result in energy shortages in parts of Europe.
The standoff between Russia and Belarus continued Tuesday amid mounting European Union criticism of the disruption, but oil ample supplies in Germany, Poland and Ukraine were expected to keep refineries running. Russia currently supplies a quarter of the EU’s oil and over two-fifths of its natural gas.
Heating oil prices rose marginally to $1.5572 a gallon, while natural gas futures added 8.3 cents to $6.714 per 1,000 cubic feet.