Front month contract oil prices settled at their lowest level since June 2005, after the U.S. government reported higher-than-expected inventories of gasoline, heating oil and diesel fuel amid warm winter temperatures.
An unseasonably mild winter in the Northeast and Midwest has led to a buildup in inventories and, as a result, weaker prices.
"There is no winter at all, thus we have a lot of supplies with no home and prices have nothing to do but fall," said James Cordier, president of Liberty Trading Group in Tampa, Fla.
Light, sweet crude for February dropped $2.73, or 4.7%, to settle at $55.59 a barrel on the New York Mercantile Exchange. The settlement follows a 4.5% decline Wednesday and represents the lowest settlement price since June 15, 2005.
The Energy Department said supplies of gasoline and distillates rose more than expected last week. Gasoline inventories increased by 5.6 million barrels, while distillates, which include heating oil and diesel fuel, rose 2.0 million barrels.