Light, sweet crude for February delivery on the New York Mercantile Exchange fell to $58.97 a barrel in midmorning trading, a drop of $2.08 from Friday's settlement price.
The Nymex trading floor was closed Monday for New Year's Day and Tuesday for the memorial service for former U.S. President Gerald Ford, although there was some electronic trading.
The Brent crude contract for February delivery fell $1.58 to $60.05 a barrel on the ICE Futures exchange, which was open on Tuesday.
In New York City, temperatures on the first day of 2007 hit a peak of 54 degrees Fahrenheit _ much warmer than normal.
But many analysts expect crude oil futures to stay on average above $60 a barrel this year because of robust demand growth in Asia and the Middle East, efforts by the Organization of Petroleum Exporting Countries to trim supply and market-rattling instability in suppliers such as Nigeria and Iraq.
OPEC's concerns that high global stockpiles and sluggish demand would undermine prices led it to agree on a 1.2 million barrel-a-day crude oil output cut in November and a further 500,000 barrel-a-day cut to take place Feb. 1.
"For 2007, oil pricing is likely going to be stubbornly high, with the OPEC group looking like it will want to defend a $55 floor under prices," said Victor Shum, an analyst with Purvin & Gertz in Singapore. He projected crude futures would trade in the $60-65 a barrel range. "With ongoing geopolitical concerns such as Iran and Nigeria, the market will also tend to have buyers on the high side."
Slower economic growth in the U.S. and a production spurt from non-OPEC countries should keep prices below the 2006 average of roughly $66 a barrel, analysts say.
A survey of energy analysts showed U.S. crude oil stocks were expected to decline for a fifth straight week in data due Thursday from the U.S. Energy Information Administration. The data, which will cover the week ended Dec. 22, have been delayed until Thursday because of the three-day Christmas holiday.
Crude stocks were expected to show a draw of 1.32 million barrels on average, a Dow Jones Newswires survey said, while both distillate and gasoline stocks were predicted to rise.
Distillate stocks, which include heating oil and diesel fuel, are expected to increase by an average of 220,000 barrels while gasoline inventories were seen rising by an average of 590,000 barrels.
Heating oil futures fell 4.72 cents to $1.6010 a gallon, while natural gas prices dropped 11.2 to $6.187 a gallon.
