Oil prices fell in the open market Wednesday as reports surfaced that an OPEC committee has recommended a reduction of between $1 and $2.50 a barrel in the cartel's benchmark price for crude oil.
OPEC's deputy secretary general denied the reports, however, and was quoted as saying that the committee did not even discuss the price of the reference grade at its recent meeting in Saudi Arabia.
As the conflicting reports circulated, oil industry analysts said the Organization of Petroleum Exporting Countries no longer appeared strongly committed to defending its $29-a-barrel standard for Arabian Light oil.
A cut of $1 a barrel in the price of oil is equivalent to a reduction of about 2.5 cents in the price of a gallon of refined petroleum products, such as heating oil and gasoline, when entirely passed on to consumers.
On the spot, or non-contract, market, Arabian Light oil for February delivery was quoted Wednesday at $27.75 a barrel, off $1.25 from its official price and down 15 cents from Tuesday, according to Telerate Energy Service, a private market information business.
Meanwhile, West Texas Intermediate, the major U.S. grade of crude, was quoted at $25.10 on the spot market, off 30 cents from Tuesday, as it hovered at levels last seen five years ago.
Oil analyst Stephen Smith of Data Resources Inc. said that, with contract sales of West Texas Intermediate now quoted at about $28 a barrel by most major U.S. oil companies and with Nigeria breaking ranks with OPEC in October to reduce its Bonny Light oil by $2 a barrel to $28, OPEC would be justified in cutting Arabian Light to $27 or $27.25 a barrel.