Oil Prices Slide To Four-Year Low As Opec Rescue Efforts Fizzle

Oil prices plunged Monday to levels unseen in nearly four years, as traders decided OPEC won’t try any quick fixes for the depressed market.

The Organization of Petroleum Exporting Countries has pondered the idea of an emergency meeting next week, but Saudi Arabia’s oil minister, Ali Naimi, seems to have shot down the idea.

Unidentified OPEC sources told Dow Jones Newswires Monday that Naimi notified the others he won’t attend a March 16 meeting of the group’s monitoring panel. OPEC’s president, Ida Bagus Sudjana of Indonesia, had invited all ministers to the meeting, raising the possibility output cutbacks could be considered.

But Naimi said over the weekend that he won’t cut the kingdom’s production only to lose market share to other OPEC members, which are pumping more than they agreed.

The main question now hanging over the market: How low will the price of oil have to go before one of the two protagonists in the latest internal OPEC squabble - Saudi Arabia or Venezuela - will blink?

“I’m sure there is a level below which they cannot continue the status quo,” said Manouchehr Takin, a senior oil analyst at the Center for Global Energy Studies in London. “When it gets to a really critical stage, they will get together. What level of pain can they endure?”

But Takin was not making any bets on what the magic number might be for the 11-nation OPEC. He predicted current prices would force some small operators in places like Texas and Oklahoma to shut down high-cost, low-volume oil wells, however.

Brent crude oil to be delivered in April fell 64 cents a barrel, to $12.95, late Monday afternoon on the International Petroleum Exchange in London.

Light sweet crude oil to be delivered in April was off 62 cents at $14.29 a barrel on the New York Mercantile Exchange. On Friday, the spot month contract in New York had plunged below $15 per barrel for the first time since April 1994.

Oil prices have been sinking since OPEC decided in November to increase its stated output ceiling by 10 percent - just as world demand for crude was slowing due to the Asian economic crisis. A relatively mild winter in parts of the United States also has reduced demand for home heating oil.

In the past, Saudi Arabia has acted as a “swing producer” within OPEC, adjusting its own massive production as necessary to stabilize often volatile global markets.

But Naimi said in remarks carried Sunday over the state-run Saudi press agency that he will not do this “only to find out that other countries, especially those who do not adhere to their quotas, flood the market, undermine prices and take our valuable customers.”

Saudi Arabia, he said, has “abandoned once and for all the role of swing producer.”

Venezuela is by far the biggest quota-buster in OPEC, but oil minister Erwin Arrieta said last week that his country won’t cut production by even one barrel.

Although several of the group’s smaller players are clamoring for cutbacks, they may have to wait to see whether the Saudis or the Venezuelans back down first in the face of lower revenues that will prove devastating to all the oil producers.

“It could be really that this is a war of attrition between the two,” Takin said.

Libyan oil minister Abdalla Salem el-Badri said last week the crisis has cost the organization some $8 billion in lost oil revenues.

In Baghdad, meanwhile, a senior Iraqi official said Iraq would not attend any OPEC meeting.

Iraq has been barred from freely exporting oil since its 1990 invasion of Kuwait. Under a special program, the United Nations has allowed it to sell limited quantities of crude to buy food for its 22 million people.

The Iraqi official, who spoke on condition of anonymity, said that country would not reduce its U.N.-authorized pumping because it had to “produce and produce” to feed its people.