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LONDON - Oil fell to US$56 today as warm winter weather curbed fuel demand in top consumer the United States, giving up earlier gains of over US$1 after Russia halted exports to Belarus, hitting supply to Germany and Poland.
US crude was down 23 cents at US$56.08 a
barrel by 1743 GMT in volatile trade. London Brent fell 17 cents to US$55.47 a barrel.
"It seems we're witnessing a continuation of the trend from last week," said Frederic Lasserre, head of commodities research at SG CIB.
"Sentiment seems very bearish, especially among funds. We could be experiencing one of the warmest winters for many years and if that is the case it will have a sizeable impact on first quarter US demand."
Oil has slipped nearly $5 since the start of the year as warm weather in the US Northeast cut demand in the world's largest heating oil market and fuel stocks rose.
Heating demand in the region was forecast to average much below normal for the next five days, with the six-to-10-day forecast for temperatures to average above normal, private forecaster DTN Meteorlogix said today.
Investors were also sceptical of talk of more action from members of the Organisation of the Petroleum Exporting Countries to stem the slide. They cited the lack of compliance among members with a November agreement to cut supplies by 1.2 million bpd.
"Fundamentals are weak and the market is very wary about non-compliance from Opec," said Christopher Bellew, an oil futures broker at Bache Financial in London.
Opec members were holding consultations on possible further action to stabilise oil markets, a senior Opec delegate said today.
"The fast and deep drop in the oil market in the last week is worrying oil producers," the delegate said.
The world's largest oil exporter, Saudi Arabia, will cut oil output by 158,000 bpd from Feb. 1 in line with Opec's latest production cut, a Saudi source told Reuters on Monday.
The source confirmed that the kingdom's total cut, including curbs made to supply in November, would equal 538,000 bpd. That would take Saudi supplies to 8.5 million bpd.
Opec agreed last month to cut 500,000 bpd from supplies from Feb. 1, on top of the earlier November cut.
But a Reuters survey showed on Friday that Opec had made little further progress in December in lowering supply to bolster prices, as higher output from some members offset continuing cutbacks by Saudi Arabia and others.
Supply from the 10 countries bound by output targets was 26.96 million bpd, up 60,000 bpd from November, the survey found on Friday. December supply was 680,000 bpd less than in October, just over half the cut Opec pledged from Nov. 1.
RUSSIA
Russia halted supplies of crude through the Russian Druzhba (Friendship) pipeline to Belarus, halting supply to Poland and Germany in a trade dispute between Moscow and Minsk that could lead to fuel shortages across Europe.
Russia is the world's second largest exporter and about 1.8 million barrels per day (bpd), two-fifths of its shipments, go through the line. Europe's refiners are heavily reliant on Russian supplies to make winter heating oil and other products.
Russia's pipeline monopoly Transneft said today it was forced to act because Minsk had been siphoning oil from the pipeline.
The Belarussian foreign ministry denied taking the oil illegally. Belarus is in a tit-for-tat row over energy supplies with Russia. Minsk slapped a duty on transit shipments of Russian crude oil through the pipeline last week in retaliation to Moscow imposing duties on oil sales and doubling the price of its gas exports to Belarus.
- REUTERS