NEW YORK, Dec 30: Oil prices edged higher on Friday on the last day of trading in 2006, closing out a volatile year that saw record prices and then a sharp decline of more than 20 per cent from mid-year highs.
New York's main contract, light sweet crude for delivery in February, gained 50 cents to close at 61.05 dollars a barrel after briefly falling below $60.
The final New York price for 2006 was just a penny higher than at the end of 2005, but it came after a roller-coaster year.
In London, Brent North Sea crude for February delivery rose 19 cents to reach $60.86 at the settlement, up just three per cent from year-end levels of 2005.
Oil prices have tumbled since rocketing to record high points 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 per barrel in New York. In August, Brent North Sea crude reached an all-time high of $78.64 per barrel in London.
These levels put oil prices $20 higher compared with the start of 2006 and four times higher compared with 2002 prices.
However prices have since dived owing to high levels of US energy inventories and mild temperatures in the United States, while traders are not appearing to pay too much attention to 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.
James Williams, analyst at WTRG Energy, said market action was quiet as a lot of traders were out today. An early effort to lock in gains and send prices lower failed as most of the profit-taking was done last week. 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 oil prices again for years to come.
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.
Williams said the record midyear prices were caused by special factors including limited refining capacity at the start of the year, a change of US gasoline standards and fears about a new conflict with Iran.—AFP