Oil prices fell to a seven-week low under $47 a barrel as growing fuel stocks in the US eased fears of a winter supply crunch despite a cold snap in North America at the weekend.
US light crude slipped to $46.79 a barrel, down 53 cents on the day and the lowest price since September 22nd. Prices have fallen almost 16 per cent from the record high of $55.67 on October 25th.
A snowstorm and high winds cut power to more than 100,000 customers in Nova Scotia on Sunday, while temperatures in the key heating oil consuming region of the US northeast were below normal, but were expected to warm this week.
Heating oil inventories in the key markets of the United States, Germany and Japan are much lower than normal for the time of year, spurring fears of a supply squeeze should winter hit early or hard.
Swelling stockpiles and signs that high energy costs are dulling economic growth, chipping away at fuel demand, have triggered an exodus of speculative funds from the oil markets.
"During the major run-ups, you had funds buying up the market when it was getting lower, and that was a sort of safety net for bullish players," said John Brady at ABN AMRO in New York. "But we don't see that any more, and it looks like they (funds) don't seem to be interested in building long positions."
But the fraught geopolitical position especially the growing insurgency in Iraq could lead to more market volatility .