Oil fell toward $56 a barrel today, extending this week's slump due to unseasonably mild temperatures in the US northeast that have curbed demand and given refiners time to top up inventories.
US January crude oil futures fell 13 cents to $56.37 a barrel by 8:20am, recouping earlier losses that knocked the market to as low as $55.72.
Oil prices have tumbled nearly $15 in the past three months as bullish fears of a winter fuel supply crunch dissipate amid easing demand growth and robust stockpiles in the United States, Europe and Japan, particularly of home heating fuels.
Assurances that core Opec members see no need to cut back production at the cartel's December 12th meeting, despite slumping prices and swelling storage tanks, added to the bearish pressure.
"Opec has made sure there's no shortage of crude oil and the world refining system has responded to the (profit margin) incentives that the hurricanes have provided, plus demand is a bit lower year-on-year," said Michael Coleman, managing director at Singapore-based commodity fund manager Aisling Analytics.
Stockpiles may continue rising if forecasts for much warmer than usual weather hold true throughout this week. Private forecaster Meteorlogix said balmy weather will only turn colder than the seasonal average at the end of the week. "Every warm day is a day lost for the bulls," said Mr Coleman.
"We would need a really severe, prolonged cold spell - say six to eight weeks - to begin to make a big dent in inventories," he added.