Commodities Tuesday, Feb. 24, 1987 : Oil Futures Prices Slump

Oil futures prices slumped below $17 a barrel Tuesday, reaching a level last seen before OPEC agreed to curtail production in December.

On other markets, wheat futures moved higher, pork bellies were a little higher, while livestock were mostly lower, and precious metals were mostly lower.

“Traders have turned bearish on oil,” said Andrew Lebow, an analyst in New York with Shearson Lehman Bros.

Two factors are at work here, he said. Poor refinery profit margins are putting pressure on crude prices and there is diminishing optimism about the ability of OPEC to hold to its production-control agreement.

“Refinery runs have been much higher than they should have been for the last six weeks,” said Lebow. “As a result there’s been a considerable buildup in gasoline stocks and in heating oil stocks as well.”

The surplus has put pressure on oil product prices to the extent that some crude oil is being refined at a loss, Lebow said.

“If I know I’m going to lose money on every barrel I refine, why would I buy oil at some fixed price? I wouldn’t,” he said.