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Oil dropped a dollar on Monday amid robust stockpiles in consumer nations after a mild start to winter, resuming a sell-off that has cut 16 per cent from prices since the start of the year.
Dealers said a burst of chilly weather in the US Northeast, the world's
biggest heating oil market, was limiting crude's losses but uncertainly remained over how long the cold would linger.
"The concern is whether this cold weather will last long enough to significantly kick up demand," said Peter Beutel, analyst with Cameron Hanover. "People are waiting to see if any genuinely supportive factors might emerge to turn this market around."
US crude was down US$1.01 to US$50.98 a barrel after having risen above US$53 earlier in the session. London Brent was down 94 cents to US$52.50.
Oil prices have lost nearly 35 per cent from peaks near US$80 a barrel hit last summer and energy analysts said the poor performance had recently caused speculators to bet heavily on further losses.
The latest US government inventory data showed a build in the nation's oil supplies of 6.8 million barrels amid a surge in imports and soft demand for heating oil, dulling concern over output cuts by producer group Opec.
Heating oil inventories are running nearly 5 per cent higher than a year ago, the data showed.
Temperatures in the US Northeast, however, were expected to average below normal for the next six-to-10 days, private forecaster DTN Meteorlogix has said. It added temperatures in European cities will also mostly drop in the next few days.
The dip in temperatures comes after record warmth in December and a mild start to January, but forecasters are at odds over how long the cold will last.
For the time being, Opec appears to have ruled out an emergency meeting to address the price decline. Algeria's Energy and Mines Minister Chakib Khelil told state radio on Sunday leading exporter Saudi Arabia was against such a move.
Libya's top oil official Shokri Ghanem said Opec members were seeking full compliance with existing output cuts.
Opec has agreed to trim production twice since November. It first pledged to implement a 1.2 million-barrel cut from Nov. 1 and later added a further 500,000 bpd cut from Feb. 1.
The latest investment flow data published by the Commodity Futures Trading Commission showed showed large speculative funds on the New York Mercantile Exchange reduced their net short position in US crude oil last week.
The shift in positions came just before oil prices dipped briefly below US$50 a barrel.
- REUTERS
