Oil prices tumble as rising US temperatures cut demand

CRUDE oil in New York tumbled for the second straight session as mild northeast weather is expected to trim US fuel demand.

Heating-oil and natural-gas prices also plummeted.

Temperatures in New York will average 5.3 degrees Fahrenheit above normal over the next seven days with heating demand 18% below normal, according to forecaster Earth Satellite Corp. The northeast consumes three-fourths of the US’s heating oil.

“Warm weather this holiday week will reduce demand for heat,” said Carl Larry, vice president of global energy sales for ABN Amro Inc. in New York. “Oil prices are also at extremely high levels. Nobody wants to buy at prices well over $30, especially without cold weather to boost demand for heating fuel.”

Crude oil for February delivery was down 93 cents, or 2.8%, at $32.09 a barrel at 11:13am on the New York Mercantile Exchange. Prices were up 5.8% from a year ago.

The front-month oil contract last Thursday jumped to the highest closing price since March 17.

In London, the February Brent crude-oil futures contract was down 87 cents, or 2.9%, at $29.18 a barrel on the International Petroleum Exchange.

Oil prices rallied last week after the US Energy Department reported inventories tumbled for the fourth straight week to the lowest level since March 14. Stockpiles in the week ended Dec. 12 fell 5.1 million barrels to 272.8 million.

Prices also slid with natural gas on speculation that falling values for the rival fuel will encourage industrial consumers to keep burning gas rather than seek oil-based alternatives, such as heating oil. Gas for January delivery was down 32.2 cents, or 4.6%, to $6.66 per million British thermal units on the Nymex.

The January heating-oil contract was down 2.79 cents, or 3%, to 91 cents a gallon on the Nymex. As many as 10% of US power plants and factories can burn either oil or gas, according to the National Petroleum Council.