Oil prices plunge

Oil prices tumbled to their lowest level for four months today as unseasonably warm weather kept heating systems switched off.

The end of the hurricane season in the Gulf of Mexico was also cited as a reason why traders were able to purchase a barrel of US light crude oil for December delivery for less than $57 for the first time since July 21.

It means oil is now 20% cheaper than the summertime peak of $70.85, which was set when Hurricane Katrina blazed through the Gulf of Mexico.

Motorists in the UK are starting to see pump prices come down, although petrol retailers have been accused by watchdogs of being too slow in their response to the drop in the cost of oil.

Luke Bosdet, of the AA Motoring Trust, said many retailers had “dragged their feet” in lowering prices and it took supermarket chain Asda to inject fresh competition into the market in the past fortnight.

The average price of a litre of unleaded currently stands at 91.54p although it was possible to fill the tank for less than 90p a litre in some towns, Mr Bosdet said. Pump prices surged above £1 a litre for the first time in history in the wake of Katrina.

Although commodity markets remain alert for evidence of a sudden cold snap in the northern hemisphere, recent data has pointed towards demand being weaker than first thought.

The International Energy Agency (IEA) conceded in its monthly report that the growth in demand for oil this year may not be as high as it previously believed.

Daily consumption of crude was now likely to be 1.2 million barrels this year and 1.66 million barrels in 2006, the IEA said.

Paul Horsnell, head of energy research at Barclays Capital, said winter had got off to a “relatively slow start” in regions including central Europe, Japan and the United States.

“It’s not the peak months for oil demand but it is contributing to bearish sentiment at the moment,” said Mr Horsnell, adding that many traders also held a negative view of the US economy.

The softer oil price boosted all the major markets around the world with the Dow Jones Industrial Average lifting more than 90 points and the Nikkei Index in Japan rising 107 points overnight.

Companies with high levels of oil consumption were among the best performers in London as the FTSE 100 Index advanced 29.7 points to stand at 5453.2.

Speciality chemicals firm Johnson Matthey hit its highest level for more than five years, while British Airways was at a peak not seen for 18 months. BA confirmed last week that its annual fuel bill was likely to be £525m (€780m) higher than in 2004.

After falling below $57 a barrel in overnight trading, the price of US light crude recovered slightly to stand 1.2% lower at $57.09. Brent crude was also on the slide, falling nearly a dollar to $54.85.