Crude Oil Drops $2, Falls to 18-Month Low

LONDON –- The new year is barely two weeks old, and already crude oil is down nearly 12 percent since the start of the year.

With the eastern U.S. continuing to enjoy mild weather, fuel consumption is dropping, causing stockpiles to increase. Above-normal temperatures are forecasted for the region for the rest of the week.

Bloomberg.com reported that crude oil for February delivery fell $1.36 or 2.4 percent to $54.72 a barrel as of 10.21 a.m. on the New York Mercantile Exchange. In addition, futures declined to $53.88, the lowest point since June 13, 2005 just before Hurricane Katrina. Prices are down 10 percent this year and 14 percent from a year ago.

The National Weather Service has predicted U.S. heating oil demand will be about a third below normal this week.

Not surprisingly, the steep price cut has caught the attention of the OPEC countries. Producers agreed to cut output by 1.2 million barrels a day starting Nov. 1, and last month they agreed to a further cut of 500,000 barrels a day as of Feb. 1.

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According to Bloomberg.com, OPEC output dropped 245,000 barrels a day — 0.8 percent — last month; daily production declined 550,000 barrels in November.

Brent crude oil for February settlement also fell — down $1.35, or 2.4 percent, to $54.25 a barrel on the London-based ICE Futures exchange.

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