Oil prices at 18-month low

Oil prices slumped to a fresh 18-month low today as the mild winter in the United States and western Europe kept a lid on demand at a time of growing global supplies.

The cost of a barrel of crude fell 37 cents to 54.81 US dollars in London while it dipped 45 cents to 55.64 US dollars in New York.

The price of oil has fallen 9% already this month and is well below the 78 US dollars it hit in July during fighting in Lebanon and concerns over Iran’s nuclear capabilities.

The Opec cartel of leading oil producing countries was today said to be considering emergency measures to prop up prices.

Winter in much of Europe and the US north east has been warmer than normal, which has curbed demand for heating fuels.

Analysts said large funds that held long positions – those that expected prices to rise – have been exiting the market since prices began their downward spiral, exacerbating the decline.

Tanya Clarke, of Kepler Teather & Greenwood Merrion, said in a research note: “Oil prices came under some pressure as the market grew concerned over the mild weather in the US and fears over a big hedge fund liquidating a large long position.”

And in a separate note, John Kilduff, senior vice president for energy risk management at Fimat USA, said: “We are seeing unfettered selling, any and all supportive factors are being ignored.”

The weak price of oil could be good news for consumers in the UK with petrol prices lower than they were during the summer and energy companies under growing pressure to slash household bills.

But the Daily Telegraph said Opec oil ministers were discussing the possibility of cutting production to stop the price falling further.

Opec controls how much oil its members pump out of the ground to keep the market stable and to ensure producers achieve a reasonable rate of return on their investments.

Last month Opec agreed to cut production by 500,000 barrels a day on February 1 following a cut of 1.2 million barrels in November.

Its next meeting is due to take place in March but reports suggest some members, such as Venezuela, are in favour of bringing that meeting forward, with Opec keen to keep oil prices at between 55 US dollars and 65 US dollars a barrel.

On Monday, crude oil prices rose as high as 57.72 US dollars on reports that Opec was considering another cut in output, and worries that a dispute between Russia and Belarus could result in energy shortages in parts of Europe.

The stand-off between Russia and Belarus continued amid mounting European Union criticism of the disruption, but supplies from Germany, Poland and Ukraine were expected to keep refineries running. Russia currently supplies a quarter of the EU’s oil and over two-fifths of its natural gas.