Crude Oil Drops to January 2007 Levels

Also dampening energy prices was more bad news from the housing industry.

Construction of new homes and apartments fell by 4.5% in October to an annual rate of 791,000 units, the Commerce Department reported. It was the slowest construction pace on records going back to 1959.

Supply disruptions that once roiled markets have not slowed crude's decline as falling demand has supplanted supply issues as the gravitational force on Nymex.

"Even reports of renewed rebel activity in Nigeria are not enough to spur a rally," Addison Armstrong, director of market research at Tradition Energy, said in a morning note.

Chevron (CVX Quote) invoked "force majeure" Tuesday on 90,000 barrels a day of its Nigeria gross production after a pipeline was breached by militants in the Niger Delta.

Investors also brushed off the hijacking of a Saudi supertanker carrying $100 million in crude this week. That ship is still under the control of Somalian pirates who are seeking a ransom.

Oil prices have fallen 63% since reaching a record $147.27 a barrel in mid-July.

Crude, at least so far this week, is not posting the huge price swings that have dominated the market for the past month.

"Market sentiment is still bearish, but not as bearish as a week ago," said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. "Volatility has come down and the market is consolidating a bit."

The Energy Department's Energy Information Administration reported Wednesday that crude inventories rose by 1.6 million barrels last week to 313.5 million barrels after stagnating in the prior period.