Oil prices settled below $60 a barrel for the first time in three months on Monday, as forecasts calling for warmer weather sparked a wave of selling.
Earlier in the month, the market had moved lower on signs of weakening gasoline demand following a summertime spike in pump prices.
Light sweet crude for December fell by $1,46 to settle at $59,76 a barrel on the New York Mercantile Exchange, the lowest close since July 28. In London, December Brent futures fell by $1,32 to $58,10 a barrel.
Front-month heating oil futures fell by 7,37 cents to settle at $1,7698 a gallon, the lowest level since August 5, while front-month gasoline futures dropped by 9,81 cents to settle at $1,5261 a gallon, the lowest level since June 8.
Natural gas futures declined 85 cents to $12,205 per 1 000 cubic feet.
“The market has been spooked by warm weather,” said analyst Phil Flynn of Alaron Trading in Chicago.
Flynn and others are paying particularly close attention to the weather in the United States North-East and Midwest as a determinant of demand for home-heating fuels such as natural gas and heating oil.
If the weather is warmer than usual, that will give much-needed breathing room to producers in the Gulf of Mexico that are still recovering from hurricanes Katrina and Rita.
Flynn warned that “the market is still very concerned about tight supplies and it won’t take much to change the momentum”.
BNP Paribas Commodity Futures broker Tom Bentz said oil prices may have further to fall over the next couple of weeks and he said he would not be surprised to see the $55-a-barrel level tested.
“The mood is still pretty bearish,” he said. “It doesn’t look like we’ve found a bottom.”
Traders have been concerned since September about reductions to oil-production and -refining capacity along the Gulf coast in the aftermath of Katrina and Rita.
The US Minerals Management Service on Monday said 68% of daily oil production and 54% of natural-gas production in the Gulf of Mexico remained offline, slightly lower than Thursday.
Ken Hasegawa of Tokyo-based brokerage firm Himawari CX expects crude to trade in the narrow range of $60 to $62 a barrel in the days ahead due to a lack of decisive news in the market.
“Weather forecasts and the heating-oil demand outlook in the US may be the factors that can offer near-term price direction for crude oil,” Hasegawa said. — Sapa-AP
AP business writer Brad Foss in Washington contributed to this report