Oil hovered above $56 on Friday, after sliding to its lowest level in almost a year due to mild winter weather forecasts in the United States, combined with high fuel inventories and fund selling on commodities.
US light crude for December delivery, which expires on Friday, was down 1 cent at $56.25 a barrel, after tumbling more than 4 percent to end $2.50 lower on Thursday, when it hit an intrude low of $55.92, the lowest since November 30, 2005.
London January Brent crude was up a cent at $58.55. "The big fall may be related to the wider fall we have seen on base metals that have lost 7 percent or so over the last week," said Andrew Hutchinson at Australia and New Zealand Banking Group. "There is also a cumulating of news: mild weather, a slowing economy and fairly ineffectual noises from Opec about cutting."
Copper hit a 19-week low on Thursday as investors backed off, with prices for base metals having fallen by up to 25 percent since their peaks touched in May. Oil has slid 28 percent since a record above $78 in mid-July. The market has been weighed down by bulging crude and fuel inventories in the United States, providing a supply cushion against potential supply disruptions and peak winter demand.
The latest slide came as US government data on Thursday showed a rise in natural gas stocks that took them 7 percent above a five-year average. This helped overturn bullish data on Wednesday that showed deep draws in US gasoline and distillate stocks, signalling strong product demand and helping oil settle higher on Wednesday for the first time in four sessions.
But crude inventories are 13.8 million barrels higher than a year ago, providing a picture of abundant US supplies ahead of what could be a mild winter. The US National Weather Service on Thursday forecast warmer-than-normal weather for the US northeast, the world's top heating oil market, for the December to February period.
Other forecasts are mixed on temperatures on the region. Adding pressure to prices was the upcoming expiry of the December contract later on Friday and Thursday's drop was largely seen as sell-off of the contract.
Opec producers agreed to cut supplies by 1.2 million barrels per day (bpd) from November in an effort to stem oil's slide, but the extent of the cut remained muddy.
Data from tanker tracking consultancy Petrologistics showed Opec production at 27.2 million bpd in November, down 1.1 million bpd from its own relatively high October assessment but well off Opec's target production of around 26.3 million bpd. "We have more than enough oil off the market to re-tighten the picture in December, and into 2007," said Paul Sankey, research analyst at the Deutsche Bank.