World oil prices appeared to be ending the year on a softer note with investors focusing on the mild winter in the US to bid prices lower. Significantly, crude oil prices were about 23% below the record highs over 78 usd a barrel in July and August. New York’s main contract, light sweet crude for delivery in February, dropped 12 cents to 60.41 dollars per barrel in electronic deals before the official opening of the US market. In London, Brent North Sea crude for February delivery also lost 12 cents to reach 60.55 dollars in electronic trading. Oil prices have tumbled since rocketing to record highs during the northern hemisphere summer, owing to unrest in the oil-rich Middle East and supply disruptions. In July, light sweet crude hit a peak of 78.40 usd per barrel in New York. In August, Brent North Sea crude reached an all-time high of 78.64 usd per barrel in London. These levels put oil prices 20 dollars higher compared with the start of 2006 and four times higher compared with 2002. However they have since dived owing to high levels of US energy inventories and mild temperatures in the United States, while traders are beginning to overlook unrest in oil producing countries such as Nigeria and Iran. On Friday, “crude futures were slightly lower as market participants square positions before the long weekend, amid mild weather conditions in the US”, Sucden analyst Michael Davies said. World oil prices had firmed only slightly on Thursday, despite a massive drop in stockpiles of US crude last week. The US Department of Energy said Thursday that crude oil stockpiles slid 8.1 million barrels to 321 million in the week ended December 22. The drawdown was much steeper than the 2.5-million-barrel decline expected by Wall Street analysts. “The fact that the market hardly responded to the report suggests that most market participants are far more concerned by the milder weather in the US, which is expected to continue throughout the rest of the winter,” Davies added. The DoE report also showed that levels of distillate products, which include heating oil, increased 500,000 barrels to 133.6 million over the week, in line with most forecasts. Tetsu Emori, chief commodities strategist with Mitsui Bussan Futures in Tokyo, meanwhile said Friday that he expected the market to continue its downward slide next year, adding that people were unlikely to see 78-dollar oil again for years to come. “Most of the people are quite bullish. I’m kind of a contrarian,” Emori said, forecasting that prices could drop below 40 dollars in 2007. “The downside risk is much bigger,” he said, citing bullish expectations for the dollar, limited growth in demand and increased availability of oil sands and other biofuel products.

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