Oil Prices Dive to Lowest Levels Since 1978; No Bottom in Sight
Oil prices hit their lowest levels in eight years Monday, plunging more than $1 a barrel to less than $11 on the futures market. Analysts said a continuing fall into single-digit figures was likely.
“There’s nothing holding the market up,” said Andrew Lebow at the Shearson Lehman Bros. securities firm.
In Abu Dhabi, United Arab Emirates Oil Minister Mana Said Oteiba was quoted as saying that oil prices would drop to “$8 to $5 a barrel” without cooperation among producers inside and outside the Organization of Petroleum Exporting Countries.
“There is no bottom level that can arrest the down-slide in prices,” the official Emirates News Agency quoted Oteiba as saying.
Herrington Has Different View
But U.S. Energy Secretary John S. Herrington disagreed with that view.
“I think we’re getting near the bottom,” he said at a meeting with reporters in Washington. “I would be very surprised to see it fall to levels much lower than where it is right now.”
On the New York Mercantile Exchange, contracts for May delivery of West Texas Intermediate, the major U.S. grade of crude, closed at $10.42 a barrel.
That was down 9% from last Thursday’s close of $11.44 and down 66% from the $31.01 close of Nov. 25, 1985, the day before the current price slide began. The market was closed last Friday.
In 1978, refiners were paying an average of $10.61 a barrel for domestic crude oil.
Futures contract prices for refined products, such as gasoline and heating oil, also slumped Monday. Among contracts for April delivery, unleaded gasoline closed at 36.75 cents a gallon, down 3.5 cents from Thursday’s close, while heating oil closed at 42.78 cents a gallon, down 1.1 cents.
“Oteiba’s comments about $5 oil didn’t help the sentiment, and the warm weather hasn’t helped either,” Lebow said. As temperatures rise, demand for heating oil falls off.
The current slump began with a glut in world supplies that was already putting downward pressure on prices late last year.
In December, OPEC announced that it would increase production to preserve its “fair market share,” abandoning previous attempts to support the market price through restrained production. The decision sent prices into another tailspin, leading OPEC members to call for renewed cuts in output by both the cartel and non-OPEC members such as Britain and Mexico.
But, at a nine-day-long meeting in Geneva that ended March 24, members of the 13-nation cartel could not win agreement from non-members on production cuts, and it failed to devise a strategy for cutting its own production. The members agreed only to reconvene April 15.
