US oil prices touched a new three-month low today as mild winter weather in the United States and expectations of a rise in heating fuel stocks kept the downward pressure on the market.
US light crude hit a low at $41.37, the lowest level since Aug. 30, before recovering 18 cents to $41.64 this morning. London's Brent crude rose 14 cents to $38.41 a barrel.
Data released later today is expected to show US distillate supplies, which include heating oil and diesel, rising by 1.6 million barrels in the week ended December 3rd, the third rise in a row.
The US Energy Information Administration will release its weekly petroleum inventory report this afternoon. But weather forecasts in the US Northeast, home to 78 per cent of the nation's heating oil users, are for above-normal temperatures this week, crimping demand for winter fuel.
"There was a lot of anticipation of tight stocks and that inventories would get squeezed further but the cold weather hasn't materialised yet and we're in December. That's taken a lot of air out of the market," said Mr John Brady at ABN AMRO.
Tuesday's 3.5 per cent drop in prices took US crude to below $42 for the first time since late August when the market kicked off its rally to October's record peak above $55 a barrel.
A steep fall in prices from above $49 at the end of November has spurred some OPEC members to urge a clampdown on excess production above the group's official output limits, additional oil that has helped replenish inventories ahead of winter.
Ministers from OPEC meet on Friday in Cairo to review policy.