Oil fell $1 yesterday to near $55 a barrel as an unusually warm US winter and concern that funds were losing interest in oil pressured prices.

Balmy temperatures in the US Northeast have sharply reduced heating oil demand in the top consuming region. This has overshadowed more bullish news such as Russia's decision to shut off pipeline exports to Belarus over a trade dispute, hitting supplies to Europe.

A nearly 10 percent drop in prices since the start of the year has rung alarm bells in OPEC producers and the group's president, the United Arab Emirates, is discussing further action with member states.

US crude fell 82 cents to $ 55.27, after sinking more than $ 1 to $ 55.08 in earlier trade. It is in sight of a Nov. 17 low of $ 54.86, the weakest price since mid-2005. Brent crude fell 86 cents to $54.74.

?New York is too warm, people are enjoying the sunshine in Central Park,? said Keith Sano, manager with the commodities business unit at Sumitomo Corp.

US heating oil demand will run about a third below normal this week, the National Weather Service said the day before, extending an extraordinary streak of mild winter weather.

The mild weather undermined earlier gains made the day before after Russian crude supplies were halted through the Druzhba pipeline, which meets about a fifth of Germany's demand.

Weakest US demand for heating oil

Russia has accused Belarus of stealing oil from the line. The disruption comes one year after Russia's natural gas dispute with Ukraine hit supplies to Europe, and is likely to revive debate about Moscow's reliability as an energy supplier.

The International Energy Agency yesterday said the European oil markets could cope with the halt. Russian pipeline monopoly Transneft has not said how long the cut might last.

After last year's $ 6.4 billion, natural gas-fuelled losses at hedge fund Amaranth Advisors LLC, oil traders are also on edge for further meltdowns in the industry, although no single fund has yet been identified as in trouble.

?As US demand enters its weakest seasonal period for gasoline, compounded by a weak heating market, fund activity will likely dominate near term,? Citigroup said in a report.

Key commodity indices closed at or near two-year lows the day before, pressured by last year's weak performance ? particularly in the energy complex ? as well as fears of slower growth in the world's top economy, the United States.

The price slide has prompted OPEC members to discuss holding an emergency meeting ahead of their planned March 15 gathering.

The group agreed last month to cut 500 000 barrels per day from Feb. 1, adding to a cut of 1.2 million barrels per day from Nov. 1. OPEC's leading producer Saudi Arabia, and others, have vowed to enforce cutbacks fully.