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LONDON - Oil fell to its lowest level in nearly 19 months today on a steep rise in heating oil stocks in top consumer the United States and signs Russia may resume pumping crude to Europe.
The decline extended an 11 per cent slide in oil prices since
the start of the year as warm weather cut demand for fuels and big money funds changed their investment strategies.
US crude was down US$1.51 to US$54.13 a barrel at 1836 GMT, after falling as low as US$53.80, the lowest since June 2005. London Brent crude was down US$1.37 at US$53.81.
Closely watched US data showed a bigger than expected rise last week in distillate stocks, including winter heating oil.
"The one startling statistic is the growth in distillates inventory, which reflected the mild or nonexistent winter," said Joseph Arsenio, analyst at Arsenio Capital Management. "This scenario is not likely to alter in the short run."
The US data showed distillate stocks rose 5.4 million barrels, a much steeper rise than the 2.2 million forecast by analysts. Crude stocks fell 5 million barrels and petrol gained 3.8 million.
Merrill Lynch analysts estimated "synchronous global warm winter weather" had reduced oil demand in OECD industrialised countries by 300,000 barrels per day in December and was likely to cut back January demand by 600,000 bpd.
"In total, during the first half of the winter, OECD demand could drop by nearly 38 million barrels relative to the seasonal norm," Merrill Lynch said in a research note.
Selling already had begun after Belarus said a compromise had been found to resume exports of Russian crude to Europe via the Druzhba pipeline following a trade row. Belarus said it had scrapped transit tariffs on Russian crude.
Normal flows through the pipeline could restart in a few hours, Russia's envoy to the European Union said, adding that the dispute had been largely resolved.
Some investment funds, partly responsible for driving prices to a record US$78.40 last year, are shifting to short positions, analysts said.
"People have been chasing the trend on oil prices but the fundamentals are weaker this year and they have to look for other opportunities," Tetsu Emori, chief strategist at Mitsui Bussan Futures, said.
Oil traders have cited talk of possible hedge fund losses as contributing to the market's fall. Equity traders in Asia said stock market losses on Wednesday were caused partly by funds liquidating positions to cover oil losses.
The price slide has prompted talks between Opec's president and fellow oil ministers on what further action should be taken to brake oil's decline, Opec sources said on Wednesday.
- REUTERS