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Oil prices plunged to below $52 a barrel Thursday (Jan. 11), stoked by forecasts of more warm weather in the U.S. that could leave heating fuel supplies barely touched this winter.
According to an Associated Press report, crude for February delivery sank $2.14 to finish the day at $51.88 a barrel in New York following a $51.85 low. The contract hasn’t traded or closed at levels this low since May of 2005.
Still, the energy markets were marked by some indecision Thursday: crude dropped to below $53 a barrel in pre-market electronic trading, rose to nearly $55 a barrel in morning trading, and then fell again. Factors that could cause oil to rise once more are the possibility for escalating tension in the Middle East, and rival weather forecasts predicting colder weather to come.
“Trying to predict the weather’s like trying to figure out this wacky market right now — it’s very volatile,” said Alaron Trading Corp. analyst Phil Flynn.
However, most analysts agree that the mild Northeast winter has already been priced into the market, and the question now is whether factors such as global energy demand, turmoil in the Middle East, violence in Nigeria and production cuts by OPEC will reignite the energy markets.
“The impact of the weather should not be overstated. Heating demand is a comparatively small part of global consumption,” said Antoine Halff, an energy analyst at Fimat. “There’s potential for a rebound.”
Adding to the slide Thursday was the return of oil shipments through Belarus to other parts of Europe after tensions eased with Russia, as well as the overriding belief that the Organization of Petroleum Exporting Countries (OPEC) won’t announce another production cut just yet to stanch the market’s drop.