Oil tumbles for a second day

[notiCIas]

Oil tumbles for a second day

Crude sinks 2 percent after sliding 4 percent Wednesday on warm weather, ho-hum inventory report.

January 4 2007: 10:49 AM EST


NEW YORK (CNNMoney.com) -- Oil continued its selloff Thursday, losing over 2 percent as a government inventory report offered few surprises and the Northeast U.S. continued to bask in warm weather despite what should be the coldest time of the year.

U.S. light crude for February delivery fell $1.40 to 56.92 a barrel on the New York Mercantile Exchange. Oil had traded down about $1.65 just prior to the report's release and lost over 4 percent Wednesday.

In its weekly inventory report, the Energy Information Administration said crude stocks fell by 1.3 million barrels last week. Analysts were looking for a decline of 800,000 barrels, according to Reuters.
Distillates, used to make heating oil and diesel fuel, rose by 2 million barrels while gasoline supplies jumped by 5.6 million barrels. Analysts were looking for a 900,000 million drop in distillates supplies and a 1.5 million build in gasoline stockpiles.

A staffer on Reuters' energy desk had warned that the actual numbers could be far from these estimates, saying EIA made a mistake in a recent previous survey.

Oil is at its lowest price since mid-November. Warm weather was the main driver behind Wednesday's selloff.

On Wednesday the National Weather Service forecast temperatures will remain above normal in the Northeast, the world's biggest heating oil market, for the next 6 to 10 days.

Other forecasts have temperatures in New York City 10 to 25 degrees above normal over the next 10 days.

Temperatures in the U.S. Northeast have been well above normal all winter, with many experts blaming the El Nino weather phenomenon that formed in the Pacific Ocean in the fall of 2006.

Oil prices have fallen over 25 percent from highs reached in July and have been range-bound near $60 for the last few months.

Stocks of oil majors, including BP (Charts), ExxonMobil (Charts), ConocoPhillips (Charts), Chevron (Charts) and Royal Dutch Shell (Charts), stopped mirroring crude prices in mid-September and rebounded as traders bet on rising oil prices and looked for deals in a sector many saw as undervalued.

But over the last few weeks the traditional relationship with oil stock prices tracking the cost of crude has been re-established.