Oil prices hit surprisingly low level due to warm winter

Oil prices slipped slightly Friday, a day after plunging more than $2 a barrel as warm weather in the United States cut heating demand.

Photo: Oil prices hit surprisingly low level due to warm winter

Light, sweet crude for February delivery dropped 26 cents to $55.33 a barrel in morning trading on the New York Mercantile Exchange. Prices earlier bounced around the prior day's settle price, falling as low as $54.90 - the lowest price in 19 months - and climbing as high as $56.01.

The contract on Thursday fell $2.73, or 4.7 percent, to settle at $55.59 a barrel - the lowest settlement price since June 15, 2005. The drop followed a 4.5 percent decline Wednesday.

February Brent crude on London's ICE Futures exchange fell 13 cents to $54.98, after earlier dropping as low as $54.50.

Ministers of the Organization of Petroleum Exporting Countries are waiting to see whether the lower price trend continues before taking any further action, the chairman of Libya's oil company said Friday.

"We are concerned - of course," Shokri Ghanem told Dow Jones Newswires from Tripoli. "We need to see if this trend continues as it has only been for two days so far."

Oliver Stevens at IG Markets said the price could rise again if it steadies near the current level.

However, he said, "should the $55 per barrel support level be broken, oil may well trade well down only to find support the $50 level."

Natural gas in underground storage fell by 47 billion cubic feet to 3.07 trillion last week, according to the Energy Information Administration. Traders and analysts had been expecting a withdrawal of 55 billion cubic feet, according to a Dow Jones Newswires survey.

Natural gas prices rose 2.2 cents to $6.184 per 1,000 cubic feet.

"It now seems that we might get some colder weather after January 20th, but some are wondering if that could be too little, too late," analyst Peter Beutel of energy consultancy Cameron Hanover wrote in his daily note.

U.S. crude inventories declined last week by 1.3 million barrels to 319.7 million barrels compared with the previous week, the EIA reported Thursday. Analysts on average had expected crude stocks to rise by 930,000 barrels, according to a survey by Dow Jones Newswires.

However, distillate inventories, which include diesel fuel and heating oil, increased by 2 million barrels to 135.6 million barrels as warm winter weather hurt demand. Distillate stocks were expected to increase by an average of 1.15 million barrels, the AP reports.

Weather has become an increasingly important factor in the price of oil in recent years. A warm winter and a mild hurricane season last year have combined with a forecast for warmer-than-normal temperatures this winter to put downward pressure on oil prices.

In other Nymex trading, heating oil futures were unchanged at $1.5526 a gallon, and gasoline prices fell 1.75 cents to $1.4695