LONDON, Jan 5: World oil prices dropped below $55 per barrel on Friday, with light sweet crude oil reaching its lowest level for more than 18 months owing to warm winter weather in the United States that has dented demand for heating fuel, traders said.

Prices later rebounded amid volatile trading.

New York’s main contract, light sweet crude for delivery in February, slid 69 cents to $54.90 per barrel before the official opening of floor trading in the United States. This was the lowest level since June 14, 2005.

It later stood at $55.70, up 11 cents.

In London, Brent North Sea crude for February delivery lost 61 cents to $54.50 in electronic trading -- the lowest point since November 2005.

It later stood at 55.25 dollars, up 14 cents.

At current prices, oil futures have fallen about 9.0 per cent since the start of 2007.

“Expectations of a continuing mild US winter have sapped expected demand for heating fuel,” Sucden analyst Michael Davies said on Friday.

“There was also talk of funds bailing out of the market after suffering heavy losses recently.”

Crude prices have tumbled since the start of the New Year as unseasonably warm weather in the United States curbs demand for heating oil in the northeast United States.

The slump has extended from the end of last year despite efforts by the Organisation of the Petroleum Exporting Countries (Opec) to cut production in a bid to support prices.

The Department of Energy (DoE) revealed on Thursday that US stockpiles of distillates, which include heating fuel, jumped by two million barrels to 135.6 million barrels in the week ending December 29.

That reading was much more than the rise of 850,000 barrels predicted by analysts.—AFP