Oil Prices Fall Sharply After Saudi Warning

Oil prices continued sliding for the sixth straight day today, plunging severely after Saudi Arabia’s oil minister warned that crude could fall to $15 a barrel and said the recent free-fall could lead to world economic chaos. Prices later recovered some of the lost ground.

Toward the end of trading today, Brent North Sea crude for delivery in February was selling at $18.30 a barrel, up from a morning low of $17.70 but down from Wednesday’s late price of $19.90 a barrel.

West Texas Intermediate, the top U.S. crude, sold for $19.77 a barrel for March delivery, after opening at $18.75 on the New York Mercantile Exchange. On Wednesday it closed at $20.39.

While the price for immediate delivery was lower today, contracts for April through August delivery sold between $19.70 and $20.20 a barrel, indicating that the market is not yet betting on a fall beyond present levels. February contract prices for gasoline and heating oil were down sharply.

Warning From Yamani

Today’s turbulence began in Europe when Ahmed Zaki Yamani, the Saudi minister, told an interviewer that Britain and the non-OPEC producing nations must cooperate with the Organization of Petroleum Exporting Countries in limiting production to control prices.

Otherwise, “There will be no limitation to the downward price spiral which may bring crude prices to less than $15 a barrel, with adverse and dangerous consequences for the whole world economy,” he was quoted as telling OPEC’s official news agency.

Yamani’s comments shook the oil market, just one day after it had shown signs of settling at levels near $20 a barrel. Since late November, prices have dropped more than one third to the lowest point in six years.

Producing nations, determined to hang on to their share of the market, have been pumping more oil than the world needs. They hope the inevitable price fall will encourage other producers to cooperate in restraining production.

38% Drop Since November

In late November, a barrel of West Texas Intermediate traded at $31.70 a barrel. Last Wednesday, before the latest price drop began, it stood at $25.15. The spot price closed Wednesday at $20.90, up 80 cents from Tuesday. Today, it was below $20 again. That makes a drop of 38% from November and 22% in barely more than a week.