Crude oil futures fell on Wednesday, extending losses from the previous session as mild weather cut demand for heating oil in the US.
West Texas Intermediate crude for February delivery dropped 40 cents to $60.70 a barrel in trade on the New York Mercantile Exchange. Meanwhile ICE February Brent lost 35 cents to $60.75 a barrel.
Crude futures tumbled by over $1 on Tuesday after the National Weather Service said heating oil demand this week would be 23 per cent below normal in the US, the world’s biggest energy consumer, following an exceptionally mild Christmas.
The news wiped out initial gains on Tuesday that were sparked by concern that Iran might disrupt oil flows in response to UN sanctions.
Furthermore, traders said there was plenty of other news out over the least few days that could have strengthened oil prices.
Abu Dhabi’s state oil company, the main producer in the UAE, said it would cut exports by 3 to 5 per cent, the first sign of a member of the Organisation of the Petroleum Exporting Countries promising to deliver a second round of production cuts.
Meanwhile, away from the ongoing political tensions surrounding Iran, fighting widened in Somalia, where Ethiopia has declared war on Somali-backed rebels.
“It seems that for all the talk about the Opec cuts and geopolitical flare-ups around the world, the weather in the US is the key factor keeping the pressure on [oil] prices,” said Edward Meir at Man Energy.
Mr Meir said that there were two possible consequences if the weather in January follows the same mild pattern as December in the US. “First, the winter of 2006/7 will pass into history without exerting undue pressure on inventory supplies and, secondly, the mild weather could pretty much blunt the tightening impact of Opec cuts.
For the next indication of the state of US fuel stocks, traders were awaiting inventory data, due to be released on Thursday. Distillate stocks, which includes heating oil, were expected to have risen by 200,000 barrels according to consensus forecasts. However, crude inventories were expected to fall by 600,000 barrels following shipping disruption caused by fog.
Gold prices rose yesterday, building on Tuesday’s gains, as a drop in the dollar saw renewed investor interest to buy the metal.
Gold climbed to $627.60/628.60 a troy ounce, up from $624.20/625.20 in New York on Tuesday.
“Gold is still below the resistance levels at $632, but another day like the last two would see us into a higher trading band,” said Simon Denham, chief executive of Capital Spreads.
Other precious metals also advanced, with silver rising to $12.73/12.80 an ounce from $12.63/12.70 overnight in New York, while platinum was up $1 at $1,120/1,125 an ounce.
Tin prices rose to a 17-year high on expectations of a supply deficit in 2007 due to a drop in Indonesian output.
The three-month tin price on the London Metal Exchange rose $425 to $11,525 a tonne, the highest level since 1989 when the metal was re-introduced on the London market.
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