Oil prices slip further

Oil prices slipped Friday, extending a sharp decline in the new year as unseasonably warm weather in parts of the United States appears to be curbing winter demand for fuel.

Light, sweet crude for February delivery on the New York Mercantile Exchange dropped 14 cents to $55.45 a barrel in electronic trading by midday in Europe.

The contract on Thursday fell $2.73, or 4.7 percent, to settle at $55.59 a barrel -- the lowest settlement price since June 15, 2005. The drop followed a 4.5 percent decline Wednesday.

Ministers of the Organization of Petroleum Exporting Countries are waiting to see whether the lower price trend continues before taking any further action, the chairman of Libya's oil company said Friday. "We are concerned - of course," Shokri Ghanem told Dow Jones Newswires from Tripoli. "We need to see if this trend continues as it has only been for two days so far."

Oliver Stevens at IG Markets said the price could rise again if it steadies near the current level.

"Should the $55 per barrel support level be broken oil may well trade well down only to find support at the $50 level," he said. "The big negative factor driving the oil market is really the warm winter weather in the U.S. Northeast," said Victor Shum, an analyst with Purvin & Gertz in Singapore. "The U.S. inventory report has also fueled the selling in oil, and it is continuing this morning."

U.S. crude inventories declined last week by 1.3 million barrels to 319.7 million barrels compared with the previous week, the Energy Information Administration reported Thursday. Analysts on average had expected crude stocks to rise by 930,000 barrels, according to a survey by Dow Jones Newswires.

However, distillate inventories, which include diesel fuel and heating oil, increased by 2 million barrels to 135.6 million barrels as warm winter weather hurt demand. Distillate stocks were expected to increase by an average of 1.15 million barrels.

Weather has become an increasingly important factor in the price of oil in recent years. A warm winter and a mild hurricane season last year have combined with a forecast for warmer-than-normal temperatures this winter to put downward pressure on oil prices.

February Brent crude on London's ICE Futures exchange rose 14 cents to $55.25 a barrel on Friday.

In other Nymex trading, heating oil futures rose 0.22 cent to $1.5453 a gallon while natural gas prices gained 5.3 cents to $6.215 per 1,000 cubic feet.