Oil Drops On Mild U.S. Weather
Oil fell nearly a dollar on Monday as mild weather blanketed much of the United States, cutting into heating oil demand from the world's largest energy consuming nation.
The drop in prices was limited, however, as dealers looked ahead to OPEC's meeting in Nigeria on Thursday at which the group's ministers will consider deepening a production cut to drain soaring world energy stockpiles.
U.S. crude prices while London Brent crude fell 22 cents to $61.98 a barrel.
"The mild weather should keep some pressure on prices," said Mike Fitzpatrick, vice president for energy risk management at Fimat USA. "The market is waiting for OPEC and inventory data or something substantial to move it."
U.S. heating demand is expected to be nearly 27% below normal this week with warmer temperatures in most regions east of the Rockies, the National Weather Service said Monday.
The warmer weather comes after the season's first cold blast last week pushed heating demand about 18% above normal, the NWS said in its weekly report.
U.S. oil prices are about 20% below the all-time high of $78.40 a barrel hit in July, but have been sticking in a range near $60 a barrel since the end of September as dealers weigh high inventories against OPEC cuts.
A slim majority in OPEC want to cut the group's output further at Thursday's meeting, a top OPEC official told Reuters. Saudi-owned Al Hayat newspaper quoted OPEC sources as saying the group would keep supply unchanged.
"I see mixed signals," Hasan Qabazard, OPEC's director of research, told Reuters. "Some ministers believe there should be cuts but some other ministers believe the market is balanced."
The Organization of the Petroleum Exporting Countries agreed to lower output by 1.2 million barrels a day from Nov. 1 to stem a slide in prices.
According to a Reuters survey, the group that pumps more than a third of the world's oil has made about 730,000 bpd of the promised cutback, OPEC's first in two years.
On Friday, OPEC President Edmund Daukoru said he favored a further cut to counter ample inventories, particularly in top oil consumer the United States.
U.S. crude oil inventories are at the highest level for this time of year since 1993.
Some analysts say an additional cutback is not needed just as world oil demand is heading toward its seasonal peak during the Northern Hemisphere winter.
"I don't think OPEC needs to cut any further because of winter demand and the impact of cuts they have already made," Mike Wittner, analyst at investment bank Calyon, said.
Even so, Saudi Arabia has told oil refiners in Asia that it will reduce their supplies next month.
About half of the kingdom's 7 million bpd of crude exports move to Asia. The world's largest oil exporter kept supplies to European and U.S. refiners mostly steady, traders said.