‘Wild Day’ for U.S. Crude on Markets

U.S. crude oil futures prices seesawed Wednesday after Persian Gulf nations scheduled an emergency meeting, heightening speculation in skittish markets that an agreement could be near on production cuts.

The main U.S. crude, West Texas Intermediate, fell as low as $11.49 per 42-gallon barrel on contracts for April delivery at the New York Mercantile Exchange, surged to $13 and then dropped back to $12.09, amounting to an overall gain of 11 cents from the previous closing price.

“It was a wild day. It was very volatile day,” said Andrew Lebow, a oil futures specialist at Shearson Lehman Bros., a New York investment firm.

Analysts said the Persian Gulf meeting scheduled for Saturday had led some traders to believe that the oil-endowed nations led by Saudi Arabia would devise a strategy limiting production.

Underlying Skepticism

This view caused the brief upward spurt in prices before underlying skepticism about the ability of producers to cooperate pushed the market down, they said.

The fluctuation also was attributed to short covering, a scramble to buy oil to lock in profits or limit losses from earlier sales of borrowed oil. Traders had sold borrowed oil as a means of betting on further declines.

The oil price plunge over the past four months represents about a 60% drop from the November high of $31.70 a barrel.

Outside of the speculative markets, Mobil, second in size behind Exxon, announced that its U.S. subsidiary lowered the contract price paid for West Texas Intermediate by $1.75 to $17 a barrel, the second reduction in less than two weeks.

Mobil is among many U.S. oil companies that have cut official prices for the major grade of domestic crude. Contract prices, which began the year between $27 to $29, range from a low of $14 a barrel for West Texas Intermediate quoted by Citgo Petroleum to a high of $19.10 quoted by Shell Oil.