WORLD oil prices have plummeted to a near three-month low, capping a two-day, 12-percent plunge as fear of a global energy supply crunch evaporated.
New York's benchmark contract, light sweet crude for delivery in January, slumped $US2.24 to close at $US43.25 a barrel, the lowest finish since September 10.
The price in New York has plummeted 12.0 percent in two days since the US government announced a sharp increase US commercial inventories of crude oil, distillates and gasoline.
Brent North Sea crude for January fell $US2.16 to close at $US40.15 a barrel, capping a two-day drop of 11.8 percent.
"A lot of people are bailing out of this market," said Alaron Trading analyst Phil Flynn.
Selling accelerated Thursday after the Department of Energy revised upwards the size of natural gas inventories, dispelling fears of a shortage despite a slight weekly decline in the stocks.
That news added to a government report showing US crude oil inventories rising, and gasoline and distillates, such as heating oil, shooting higher at an unexpectedly rapid rate.
"We continue to have a fund liquidation all across the board in crude oil, heating oil, gasoline. That is really what is at the heart of the matter here," said Refco market analyst Marshall Steeves.
"I think until we see some cold weather down the pike we will see ongoing weakness here."
Many contracts appeared to have dropped too far, but the weather forecast for the eastern United States was mild for the next six to 10 days, likely curbing heating oil prices, he said.
"After that, if we do get an insurgence of colder air then I think heating oil will bottom out because distillate stocks are still quite tight," Steeves said.
The New York crude oil price would likely bump around in the low 40 dollars a barrel for the rest of the US holiday period, he said, forecasting a range of $US40 to $US46.
"We would have thought that as we are approaching winter, prices would start to edge up over concerns about the supply in the US, particularly for heating oil," said Veronica Smart, analyst at the London-based consulting firm Energy Information Centre.
"But with the US data yesterday being better than we anticipated as we're heading into the colder winter weather, that's obviously triggered severe losses. Fears are easing over potential shortages this winter," Smart said.
Prices were also coming under pressure from comments from Organization of Petroleum Exporting Countries (OPEC) members suggesting they may postpone a cut in productiob until next year.
OPEC ministers are due to meet in Cairo on December 10 to discuss whether to rein in production.
"There is this thought that during the first quarter (of 2005), prices will remain high because of geo-political problems and because our oversupply has come down to 1.0-1.5 million barrels (per day)," OPEC president Purnomo Yusgiantoro, who is also Indonesia's energy minister, told reporters in Jakarta.