NEW YORK - Oil prices dropped nearly US$2 as dealers focused on swelling US crude stockpiles and forecasts that icy weather in the world's biggest energy consumer may give way in the new year.
US crude slumped US$1.93 to US$58.06 a barrel, adding to Thursday's losses of 86 cents. London
Brent crude fell US$2.27 to trade at US$57.13.
US crude rose to a one-month peak of US$61.90 earlier this week after colder weather in the US Northeast, the world's biggest heating oil market, helped to pull prices from a five-month low.
But the US National Weather Service on Thursday predicted much of the United States would experience warmer-than-normal temperatures from January to March, taking the pressure off of heating demand.
Earlier in the week, the US government issued a report showing crude oil stockpiles around 13 per cent above last year's levels.
"The weaker tone continues today, as in addition to bearish US inventory data, a slight warming trend is contributing to more brazen selling," said Ed Meir, analyst at Man Financial.
At its meeting in Kuwait on Monday, the Organisation of Petroleum Exporting Countries, which has been pumping flat out for most of this year, decided to keep its official output quotas unchanged for now.
However, it called an extraordinary meeting at the end of January when ministers said they would cut output if deemed necessary.
In its monthly market report on Friday, the producer group raised its forecast for demand for its oil in 2006 on the basis of robust economic growth, despite near-record energy prices.
It projected demand for Opec crude would be 28.7 million barrels per day, an increase of £134,000 from the previous forecast and fractionally lower than the figure for this year.
The projection is above the cartel's current output ceiling of 28 million for the 10 members with quotas. Including non-quota Iraq, Opec 2005 output has averaged £29.9 million.
- REUTERS
