LONDON -- Oil plunged another 3 percent on Thursday, adding to a 4 percent drop the previous session, as U.S. fuel stocks showed a big build amid unusually mild weather in the world's top energy consumer.
U.S. crude traded $1.92 lower at $56.40 a barrel by 1811 GMT, after trading down to $56.22, the lowest level since mid November. London Brent fell $1.83 to $56.13.
U.S. prices on Wednesday fell $2.73 a barrel, or 4.47 percent, the steepest one-day percentage fall since late April, 2005, according to Reuters data.
OPEC said it may have to act if the steep falls continued.
An Iranian official said OPEC was keeping a watchful eye on hedge fund selling that has contributed to a 6.5 percent price drop since the start of 2007. The group has already agreed output cuts totalling 1.7 million barrels per day.
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Unseasonably warm weather in the U.S. Northeast, the top regional heating oil consumer, and also in Europe has dragged prices lower.
U.S. demand for heating oil in the week to Jan. 6 would be about 33 percent below normal, the National Weather Service has said. [ID:nN02320209]
INVENTORIES
The low consumption has helped to boost U.S. distillate inventories, including heating oil, which rose by two million barrels, more than the 900,000 barrel rise predicted by analysts. [EIA/S]
According to the U.S. government data, gasoline also rose by a hefty 5.6 million barrels, much more than the 1.5 million barrels forecast, while crude stocks fell by 1.3 million compared with predictions of a 800,000 barrel decline.
The steep losses that have marked the start of the trading year have been mirrored across the commodities complex and have prompted expectations of waning investor interest in the sector.
U.S. copper futures hit a nine-month low on Thursday. [nN04367348]
The Reuters/Jefferies CRB Index <.CRB>, which measures prices of 19 commodity futures, fell to a session low of 294.54 on Thursday, its lowest level since early October.
"The global macro outlook is not so bullish for commodities any more," said Frederic Lasserre of SG CIB Commodities. "Supply is expected to rebound in 2007 at least for the key commodities ... when demand is slowing down."
But some analysts say the losses have been dominated by speculative hedge funds and that longer term investors will still enter the asset class.
"There is a huge amount of money still to come into the sector. We're still at an early stage of the commodities bull run," said Mark Mathias of British investment fund Dawnay Day Quantum.
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