Oil prices fall to $54.62 a barrel

Oil prices plunged yesterday to $54.62 a barrel - its lowest level in 19 months - as mild winter weather in top consumer the United States pushed prices through a crucial technical support level.

Oil is down nearly 12 per cent since the start of the year.

"We are seeing unfettered selling, any and all supportive factors are being ignored," said Fimat in a research note.

US crude fell $1.47 to $54.62 a barrel, after tumbling more than $2 earlier in the session. Brent crude traded down $1.50 at $54.10.

Both international benchmarks were at their lowest since June 2005.

"$55 was very strong support that has been broken and below that is not much," said Olivier Jakob of Petromatrix.

"If we close below $55, the next big support level isn't until $50."

Weather forecaster DTN Meteorlogix predicted above-normal temperatures for the rest of the week in the US northeast, extending an extraordinary streak of mild winter weather in the world's largest heating oil market.

Meanwhile, the International Energy Agency (IEA) said yesterday that European oil markets would cope with the halt to Russian oil exports via Belarus, which has shut down supplies to Poland and Germany.

"There is apparently no immediate impact to any of the refineries in the countries involved, as they all have working stocks of several days," the IEA said in a statement, "so there is no threat that product supplies to the end users will be disrupted."

Russia has accused Belarus of stealing oil from Druzhba, a major pipeline, and has shut off crude exports to its western neighbour, halting supplies to Poland and Germany and threatening wider disruptions in central Europe.

Russia's pipeline monopoly Transneft said on Monday that it was forced to act because Minsk had been siphoning off oil illegally from the Druzhba (Friendship) pipeline system.

"Should disruption from the Druzhba pipeline prove more prolonged, each of the refineries could source crude supplies from alternative routes and some of them are already organising alternative supplies, be it through ports at the Baltic Sea or through pipelines coming from other sources," the IEA said.

The affected member countries of the IEA, Germany, Hungary and the Czech Republic, and its two applicant countries in the region, Poland and Slovakia, each had strategic reserves which could be drawn upon if the situation warrants, it said.

"But reports from the different countries and companies currently indicate that the market is quite capable of handling this situation."

The International Energy Agency said it wanted a quick and clear resolution to the disruption.