Sagging Oil Prices Lead 4 Gulf States to Schedule Talks
Britain’s North Sea Brent crude plunged below $17 a barrel on Wednesday for the first time in two months as four OPEC oil ministers planned a weekend meeting to discuss the recent slide in oil prices on world markets.
On the European spot market, where oil is sold to the highest bidder, Brent tumbled 45 cents to $16.90 a barrel, the lowest level since it finished at $16.75 on Dec. 23. The key North Sea crude hit a high for the year of $18.85 a barrel on Jan. 14.
West Texas Intermediate, the benchmark U.S. crude, dropped 39 cents to $17.40 a barrel on contracts for immmediate delivery on the New York Mercantile Exchange, and closed below the critical $17.50 mark. It was the lowest close for the crude since Dec. 23, when it ended the day at $17.27 a barrel.
Automatic Sell Trigger
Analysts said automatic sell programs went into effect when West Texas Intermediate broke through the $17.50 barrier on the Merc during the day.
On the U.S. Gulf Coast spot market, West Texas Intermediate nose-dived by 35 cents to $17.50 a barrel.
Oil prices began to weaken in late January amid reports that the Organization of Petroleum Exporting Countries was producing about 700,000 barrels a day more than its self-imposed ceiling of 15.8 million barrels.
OPEC agreed Dec. 20 to cut production 7.2% overall in a bid to raise oil prices to an average of $18 a barrel from the $15 range that had prevailed late last year.
In Abu Dhabi, the United Arab Emirates news agency WAM said OPEC oil ministers from the UAE, Saudi Arabia, Kuwait and Qatar would meet Sunday in Qatar to examine the recent drop of about $2 a barrel on world markets.
The news agency said the oil ministers would discuss the oil markets and “reaffirm their countries’ position in support of OPEC resolutions . . . calling for adherence to production quotas and official prices based on $18 a barrel.”
Gulf nation officials said the four oil ministers are concerned by reports OPEC is overproducing because of cheating on national output quotas by the UAE, Kuwait, Iraq and Ecuador.
Surplus Noted
Andrew LeBow, an analyst at Shearson Lehman Bros. Inc., blamed some of the recent weakness in oil prices on the surpluses of U.S. gasoline and home heating supplies, which have pulled down prices for the two petroleum products.
“The real key to the whole market is whether U.S. refiners are prepared to balance supplies by cutting runs,” he said. “The American Petroleum Institute report issued (Tuesday) night gave no indications that refinery runs were going to be cut.”
Home heating oil for immediate delivery on the Merc fell 0.71 cent, to 47.19 cents a gallon, and unleaded gasoline lost 0.80 cent, to 47.78 cents a gallon.
In a show of support for OPEC, Mexico, an important independent producer, announced that it is raising its official prices for its light Isthmus crude by 40 cents a barrel and its heavy Maya crude by 50 cents for European clients, effective March 1.
