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Oil prices tumble as cold lets up in US

World oil prices tumbled on Friday on forecasts of warmer weather in the US after freezing temperatures this week drove up demand for heating fuel, traders said.

But overall global demand for crude is expected to increase next year, according to a report issued by OPEC in Vienna.

New York's main contract, light sweet crude for delivery in January slumped US$1.93 to close at US$58.06 a barrel.

In London, the price of Brent North Sea crude for February delivery sank by US$2.27 to end at US$57.13 a barrel.

Long-range forecasts from the US National Weather Service predicted above-average temperatures in most of the US from next month through to March.

"The weather has been the primary driver in the market recently, so with stocks currently ample any signs of lower demand on heating oil will knock the market lower," Sucden analyst Sam Tilley said.

US weather forecasters said that temperatures in the heavily populated and industrialized US northeast would be near normal through to Tuesday.

Dariusz Kowalczyk, senior investment strategist with CFC Seymour in Hong Kong, said "usage of heating oil will be lower than we expected and this is putting downward pressure on all energy commodities."

The northeast region has a voracious appetite for heating fuel, especially during the winter months. It accounts for some 80 percent of total US heating oil demand.

A recent cold snap in the region has boosted demand for fuel. But US stockpiles of heating fuel are 13 percent higher than at the same stage last year, which should prove adequate supplies for winter, analysts contend.

OPEC forecast that global oil demand would rise by 1.9 percent next year to 84.9 million barrels per day (BPD).

The cartel said its demand forecast for next year was a "slight increase" over its forecast last month of 84.8 million BPD, owing to optimistic predictions for world economic growth next year.

Oil demand was seen increasing in all major regions, with China accounting for more than one-fifth of the rise of 1.6 million barrels per day.

But for the immediate future, according to William Edwards of Edwards Energy Consultants, oil prices should continue to retreat from a record high reached here in late August of US$70.85 a barrel.

"The trend now is downward. Prices are not supported at this point by any fundamental factor," Edwards said.
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