Oil plunged Thursday to its lowest level price since May 2005, below 52 US dollars a barrel, following the continued steep rise in heating oil stocks in United States and a resumption of crude pumping top Europe by Russia.
Oil prices have slid nearly 15% since the start of the year as warm weather cut demand for fuels and big money funds changed their investment strategies. News that oil flows had resumed along the Druzhba crude pipeline from Russia after a dispute with Belarus also helped push U.S. oil prices down. Data from the US Energy Information Administration showed a bigger-than-expected rise last week in distillate stocks, which include heating oil, in the world's biggest oil market. Distillate stocks rose 5.4 million barrels, a much steeper rise than the 2.2 million forecast by analysts. Crude stocks fell five million barrels and gasoline gained 3.8 million. With crude down by around 9 US dollars from December, US drivers should be paying about 20 cents less per gallon in a month or so, if crude prices hold at current levels according to US market analysts. But since energy markets are volatile the opposite is also true and if crude bounces back up to 60 US dollars a barrel, pump prices would also suffer the impact. Factors that could cause oil to rise again are the possibility of escalating tension in the Middle East, growing global energy demand, violence in Nigeria and production cuts by OPEC which is scheduled to meet in the coming weeks. Merrill Lynch analysts estimated "synchronous global warm winter weather" had reduced oil demand in OECD industrialized countries by 300,000 barrels per day in December and was likely to cut back January demand by 600,000 bpd.