Oil prices slumped below $52 (€40) a barrel yesterday for the first time since May 2005, extending a decline of 15 per cent since the start of the year due to fund selling and weak demand for heating fuel.
The slide rang alarm bells for producer group Opec, which has been cutting output since autumn to stem crude's slide from record heights last summer.
"We are monitoring the market on a daily basis. The price drop is a big concern," Opec president Mohammed al-Hamli, who is also the energy minister of the United Arab Emirates, said.
US light crude settled down $2.14 to $51.88 per barrel after touching $51.80, the lowest price since May 31st, 2005. London Brent crude was down $1.99 at $51.70.
The heavy losses came as a mild start to winter slashed fuel demand in the US and other top consumers, and as poor returns forced commodities investors to alter their trading strategies, experts said.
Trading volumes and open interest in the benchmark energy contracts are on the rise despite the slide in prices, signalling that speculators who had helped oil reach peaks near $80 in July may not be fleeing but rather taking a bet on a weakening market.
The soft demand has caused US heating oil stocks to rise during a time of the year they normally fall, and comes after a quiet hurricane season left US oil production from the Gulf of Mexico unscathed.
Merrill Lynch analysts estimated "synchronous global warm winter weather" had reduced oil demand in industrialised countries by 300,000 barrels per day (bpd) in December and was likely to cut back January demand by 600,000 bpd.
Adding pressure to oil prices, Russia restarted crude exports through a pipeline to Europe after a three-day halt caused by a trade dispute with Belarus. The pipeline carries a tenth of Europe's oil supply.
Mr Hamli said that Opec would take further action to stabilise the market if needed, but no decision had been taken on holding an emergency meeting. Opec already agreed to cut 1.2 million barrels of daily output from last November and another 500,000 bpd from February.
