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Honduras will take temporary control of foreign-owned oil storage terminals as part of a government import program meant to drive down fuel prices, President Manuel Zelaya said late on Saturday.

Zelaya ordered the move after failing to reach a deal with big oil companies Exxon Mobil (XOM.N: Quote, Profile , Research) and Chevron (CVX.N: Quote, Profile , Research), as well as local company DIPPSA, to rent the terminals.

“It is not a nationalization, it’s a temporary use of the storage tanks through a lease and payment of a reasonable price,” he said.

Honduras produces no crude of its own and no longer has a refinery. Its fuel market, like that of most Central American countries, is dominated by Shell (RDSa.L: Quote, Profile , Research), Exxon Mobil and Chevron.

The government program takes control of imports away from the small group of oil companies that operate service stations in the Central American nation. Those companies have opposed the new system, saying it is anti-competitive.

A congressional commission set up to study the new system has said it could save Honduras — one of the poorest countries in the Western Hemisphere — about $66 million a year.

Zelaya, a logging magnate, said the decree will allow the government to go ahead with a deal reached in November with Conoco Phillips (COP.N: Quote, Profile , Research) to import at least 8.4 million barrels of gasoline and diesel a year.

Exxon Mobil and Chevron could not immediately be reached for comment.

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Vladimir Putin on Tuesday faced an angry European backlash about his decision to halt oil supplies through the pipelines crossing Belarus.

As the Russian president made clear his determination not to back down in his dispute with Belarus, Angela Merkel, the German chancellor, denounced his actions as “not acceptable”, noting that even during the height of the cold war, Russia had been a reliable energy supplier to Europe.

Ms Merkel, speaking as the new president of the EU, said Russia’s latest display of energy muscle “hurts trust and it makes it difficult to build a co-operative relationship.”

Mr Putin, speaking in a televised meeting with ministers in Moscow, stressed he wanted to do all he could to ensure that oil supplies to western Europe were not affected. But he escalated the dispute by telling his government to tell Russian companies to cut output because of the transit dispute.

Belarus wants Russia to pay an export duty of $45 per tonne of oil transported through Belarus. This is in retaliation for Russia slapping $180 export duty on crude oil it sells to Belarus.

In a sign of how seriously Germany now questions its reliance on Russia, Ms Merkel said the new dispute cast doubt on the wisdom of her country’s plan to phase out nuclear power by 2020.

Yet for all the political furore, oil markets on Tuesday shrugged off the latest geopolitical threat to supply, focusing instead on the warm US winter and strong inventories. At one point the price of oil hit an 18-month low point, dipping below $54 in New York, although it later recovered most of its losses.

The political row in Belarus – and Venezuela’s announcement of plans to take state control of its heavy oil projects – did little to deflect the downward trend in the price. The price of oil has fallen by more than 10 per cent since the start of the year and yesterday Mustafa Mohatarem, chief economist of General Motors, forecast it would fall below $50 this year. West Texas Intermediate crude for delivery in February fell to an intra-day low of $53.88 a barrel before recovering. Brent crude fell to an intra-day low of $53.64 a barrel before climbing back.

David Kirsch, manager of the markets intelligence service for PFC Energy, said the weak trend was likely to continue, with oil prices likely to test $50 a barrel. “I don’t see any positive news in the next week or so that is likely to lift prices,” he said.

The steep fall has caused concern among members of the Organisation of the Petroleum Exporting Countries, which last month agreed a supply cut of 500,000 barrels a day, with effect from February 1, to try to stabilise the market.

Some Opec members have a target of $60 a barrel for the basket of their output, which is typically about $5 a barrel below the benchmark prices in London and New York.

The US Energy Information Administration, a government agency, trimmed its forecast of world oil demand to 86.2m barrels a day for the first quarter of the year, down 300,000 b/d from its December forecast. The EIA forecasted US oil prices would average $64.42 a barrel in 2007 and $64.58 in 2008

The oil price fall has taken place against a sell-off in the commodities market: copper has fallen 11.3 per cent; zinc 16.2 per cent; and tin 13.1 per cent.

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Oil prices fell about $2 a barrel Tuesday to their lowest levels in 18 months in a market expecting more mild weather and rising inventories in the United States.

Temperatures in the U.S. Northeast have been above normal this winter, curbing demand for heating fuels in the world’s largest heating oil market.

Market watchers are also looking for a rise in U.S. petroleum inventories in this week’s government report.

Light, sweet crude for February delivery on the New York Mercantile Exchange dropped $2.04 to $54.05 a barrel in electronic trading by afternoon in Europe. The front-month contract last closed below $54 a barrel in June 2005.

February Brent crude at London’s ICE Futures exchange fell as much as $1.96 to $53.64 a barrel.

Traders said a break through key support levels triggered a wave of sell orders.

The Nymex oil contract slipped 22 cents to settle at $56.09 a barrel Monday after falling nearly 8 percent last week.

Monday’s session was volatile, however, as prices rose as high as $57.72 on reports that OPEC oil ministers are considering another cut in output, and worries that a dispute between Russia and Belarus could result in energy shortages in parts of Europe.

The halt to the flow of Russian oil through Belarus had supported prices Monday, but ample supplies in Germany, Poland and Ukraine were expected to keep refineries running.

Nigeria’s oil minister Edmund Daukoru discouraged talk of any immediate action to support prices by OPEC, which recently resolved to cut output by 1.7 million barrels per day.

“Let’s implement the 1.7 million fully then we’ll see if there’s a need for additional cuts,” Daukoru told Dow Jones Newswires.

If OPEC announced another production cut — on top of the 1.2 million barrel-a-day reduction that began in November, and the 500,000 barrel-a-day cut set to begin Feb. 1 — analysts say prices would likely rise. Still, OPEC’s previous cuts haven’t been able to keep crude prices above $60 a barrel for long, largely because many traders doubt that the cuts are fully enforced.

Forecasters expect temperatures in the U.S. Northeast to drop to normal levels over the next couple of weeks.

But heating oil futures fell more than half a cent to $1.5498 a gallon on Tuesday while natural gas rose 6.2 cents to $6.440 per 1,000 cubic feet.

Analysts surveyed by Dow Jones Newswires expect U.S. petroleum inventories to rise in government data to be released Wednesday by the U.S. Energy Department. Crude inventories were expected to climb an average of 820,000 barrels, the survey showed.

Crude stocks normally fall this time of year, but with imports rebounding from a recent slump, inventories are likely to rise, said analyst Phil Flynn of Alaron Trading Corp. in Chicago.

Petroleum product stocks are expected to increase for the fourth straight week. Distillate stocks, which include heating oil and diesel fuel, are seen rising by an average of 1.9 million barrels while gasoline stocks are projected to increase by 2.5 million barrels.

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Oil prices continue to come down to a realistic level but gas prices have not followed suit.  Gas prices have come down in price but certainly has not kept up with the Oil prices coming down.  Gas has drop about 10% in the same time period that Oil has fallen by nearly 25%.  Time for the gas companies to anti up!