Oil Prices Keep Sliding Down Opec Nations Not Likely To Slow Their Production
Crude oil slumped more than 5 percent to a nine-year low on skepticism that OPEC, which supplies a third of the world’s oil, will cut production to reduce a glut of world supplies.
Prices are down 31 percent since late November, when the Organization of Petroleum Exporting Countries decided to raise its production quota by 10 percent.
On Friday, OPEC postponed a committee meeting set for today, reducing the chance that the group would soon cut output, which last month exceeded the quota by about 5 percent.
“The only salvation for prices is if OPEC stopped producing more than their quota,” said Robert Nance, president of Nance Petroleum Corp., which produces 3,000 barrels of oil a day in Billings, Mont. “It appears they’re not going to do that.”
Crude oil for April delivery fell 78 cents, or 5.6 percent, to $13.28 a barrel on the New York Mercantile Exchange, the lowest close for crude since Oct. 25, 1988. Today’s drop was the biggest since crude fell 83 cents a barrel on Oct. 6.
Saudi Arabia, the world’s largest producer, and Venezuela, OPEC’s biggest quota violator, have rejected calls from other OPEC members to cut production. On Friday, the producer group postponed an output-watching committee meeting that was set for today, until March 30.
“Most of us have thought that the market would hold at each important level but it just hasn’t. A while back I thought we would hold at around $15.50,” said Jerry Samuels, managing director of Arb Oil Inc., the largest independent brokerage on the New York Mercantile Exchange.
April Brent crude fell 45 cents, or 5.2 percent, to $12.31 a barrel on the International Petroleum Exchange, the lowest for a contract closest to expiration since November 1988.
Several OPEC members, such as Libya and Indonesia, want to expand the committee meeting into a gathering of all 11 members to discuss cutting production to boost prices.
The prospect of a full meeting and output cuts are still far off, the Middle East Economic Survey said, because Saudi Arabia won’t agree. Also, Venezuela has shown no signs of ending its policy of producing above its OPEC quota.
“People are disappointed OPEC has not come forward to do anything.” said Tom Bentz, an energy trader at Cresvale International LLC in New York. “There’s still no sign of a rescue effort.”
Oil prices have fallen because “there’s good supply out of OPEC and non-OPEC,” said Arb Oil’s Samuels.
Perhaps as much as $2 a barrel of the drop can be attributed, Samuels said, to the dissipation of concern that a dispute over weapons inspections might persuade the U.S. to strike Iraq, disrupting oil supplies.
Prices are down from Feb. 20’s $16.15 a barrel, two days before United Nations Secretary-General Kofi Annan secured a promise from the Iraqi leadership to abide by UN inspections.
Samuels and other oil traders said that weaker Asian oil demand because of the region’s economic turmoil and milder-than-usual winter temperatures in U.S. heating oil markets have also helped prices fall this year, as demand wasn’t able to absorb the extra OPEC oil.
Oil company stocks have not suffered much because of the drop in prices, analysts said.
At this point traders “could simply care less about new declines in oil prices,” said Michael Young, of Deutsche Morgan Grenfell.
xxxx FALLING PRICES April heating oil fell 1.73 cents, or 4.3 percent, to 38.52 cents a gallon, the lowest closing price since Oct. 7, 1988. April gasoline fell 2.01 cents, or 4.3 percent, to 45.24 cents a gallon, the lowest since Sept. 28, 1994.