Oil prices drop to $33 US

POLITICS - Oil prices fell almost to $33 US a barrel today and is well on its way to the $30 mark. The continued gloomy outlook for oil demand and as traders sold the expiring benchmark contract due to a lack of space at a key U.S. storage facility.

By midday in Europe, light, sweet crude for February delivery was down $3.14 to $33.37 a barrel in electronic trading on the New York Mercantile Exchange. Oil prices are expected to continue falling as America's surplus of oil continues to grow.

The February contract expires today. Its last official settlement was $36.51 on Friday, as markets in the United States were closed Monday due to Martin Luther King Jr. Day. Nevertheless, electronic trading continued during the holiday and the February contract fell $1.96 to $34.55.

The February contract has fallen approx. 33% in two weeks, in part because burgeoning supplies in Cushing, Oklahoma, the delivery point for the Nymex contract, have left investors with little space to store crude, forcing them to sell.

Some oil firms have so much extra crude oil they are storing it on rented oil tankers.

One oil trader commented: "The prices are falling so fast its difficult to predict where oil prices could be a week from now. Thirty dollars? Twenty-five? Its possible."

Don't forget oil prices have been dropping rapidly since they reached the pinnacle of $147.27 on July 11th 2008. Its possible oil prices could reach a post-September 11th low of $15 by mid-summer.