Oil Prices Slip Below $61

Oil prices slipped in quiet trading Tuesday, turning lower on warmer than usual winter weather in the United States and expectations of an agreement between Russia and Belarus over natural gas prices.

Trading was muted because the New York Mercantile Exchange closed its trading floor in observance of the national day of mourning for former U.S. President Gerald Ford.

In early afternoon electronic trading, light sweet crude for February delivery on the Nymex fell 19 cents to $60.86 a barrel.

February Brent at London's ICE Futures exchange dropped 17 cents to $60.69 a barrel.

The market's short-term focus has turned to demand for winter fuels, particularly in the U.S. Northeast, the world's largest heating oil market.

Forecasts from the National Weather Service are for mild temperatures in many parts of the country into the middle of January. That could curb demand for winter fuels and has sent oil prices lower.

Government data last week also showed U.S. heating oil inventories at 4.6% above their five-year average levels.

Energy prices were also calmed by a possible deal between Russia and Belarus, which had previously been clashing over natural gas prices but are now in talks. Belarusian officials had suggested they could hinder the transit of gas across Belarus to Europe if Russian state gas monopoly OAO Gazprom halts supplies meant for Belarusian customers.

Heating oil for delivery on the Nymex fell 0.79 cent to $1.6482 per gallon, while natural gas futures fell 4.9 cents to $6.25 per 1,000 cubic feet.

Analysts said the market could still find some support from longer-term concerns over the security of supplies and on expectations of robust growth in demand.

"We still continue to think the New Year could bring in a new wave of speculative interest since ($60) seems to represent a value level," analysts at Fimat USA said. They cited geopolitical concerns in the Middle East, unrest in Nigeria's oil-producing regions and firm demand in China and India.

"All the elements that brought prices to these levels are still with us."