WASHINGTON — Oil prices declined Monday as warmer-than-usual weather sapped U.S. demand for home-heating fuels.
But in a sign of the market's persistent concern about energy supplies and the possibility of colder weather, a strong selloff early in the day across the energy complex eventually fizzled.
After falling as low as $58.60, light sweet crude for December delivery settled at $59.47 a barrel on the New York Mercantile Exchange, down $1.11.
Nymex natural gas futures had an even more volatile day, sinking to as low as $11 per 1,000 cubic feet, before reversing course and finishing at $11.873, an increase of 45.8 cents on the day.
In London, December Brent crude futures on the ICE Futures exchange fell $1.21 to $58.04 a barrel.
Oil broker Mike Fitzpatrick of Fimat USA in New York said the mild start to the U.S. winter heating season has magnified a selloff that was already in motion as oil production and refining facilities in the Gulf of Mexico recovered in the aftermath of hurricanes Katrina and Rita.
Crude futures peaked above $70 on Aug. 30, just a few days after Katrina battered the Gulf Coast. Last week they settled below $60 a barrel for the first time in three months.
Also Monday, the federal Energy Information Administration said that, for the fifth straight week, average retail gasoline prices have dropped nationwide, falling below $2.40 a gallon for the first time since early August.
The EIA said U.S. motorists paid $2.376 cents a gallon on average for regular grade last week, a decline of more than 10 cents from the previous week. Pump prices are still 38 cents higher than a year ago.
Fitzpatrick said crude futures could fall another $2 to $3 per barrel if the weather stays warm, but once Americans begin to turn up their thermostats, there will again be upward pressure on energy prices.
"All the elements that brought us higher over the past two years are still with us," Fitzpatrick said, referring to rising demand in Asia and a thinner-than-usual global supply cushion.
And while oil and natural gas production in the Gulf of Mexico is recovering, it is still well below pre-hurricane levels. The U.S. Minerals Management Service said Monday that 51 percent of daily oil production and 45 percent of natural gas production in the Gulf of Mexico remained off-line.
There are also three refineries that remain out of commission, draining the U.S. manufacturing capacity for gasoline, diesel and heating oil. Imports from Europe have helped offset that shortfall.
Nymex December heating oil fell 1.01 cent to settle at $1.7861 a gallon, while gasoline declined less than a penny to settle at $1.5561 per gallon.
The International Energy Agency on Monday reiterated widespread concerns about global oil production capacity, saying in its World Energy Outlook that the planet's energy needs will surge 50 percent by 2030 and prices will rise if output is not significantly increased.
The IEA said Monday that about 17 trillion euros ($20.3 trillion) in new investments is urgently needed to bring oil and natural gas reserves to the consumer market, and that new energy sources will increasingly be needed to meet demand in growing economies like China and India.