U.S. Crude Oil Prices Drop to 2-Month Low

U.S. crude oil prices fell to a two-month low Thursday, weighed down by growing global oil supplies and an easing of the fears about the tense Persian Gulf that had taken prices to over $22 a barrel.

Trading was heavy at the New York Mercantile Exchange, where contracts for September delivery of West Texas Intermediate, the benchmark U.S. crude, closed at $19.42 per barrel, down 21 cents from Wednesday. That was its lowest closing since June 1, when WTI ended at $19.58. A barrel is the equivalent of 42 gallons.

Traders noted that U.S. oil is now more than $3 a barrel below the early August high, and analysts say further declines are possible unless violence breaks out in the Middle East.

Throughout the week, analysts have attributed the continuing plunge of prices to worries about large inventories and overproduction by members of the Organization of Petroleum Exporting Countries as well as an apparent easing of tensions in the Persian Gulf.

Donald Morton, a market analyst in the Boston office of Prudential-Bache Securities, commenting on OPEC’s overproduction, said: “Twenty million barrels seems to be more and more confirmed. And that’s scaring the dickens out of people.”

Other estimates have ranged from 17.6 million to 19.1 million barrels a day.

However, an OPEC News Agency report from Vienna monitored in London quoted OPEC President Rilwanu Lukmancq saying that such reports were “wildly exaggerated.”

Morton said another factor contributing to Thursday’s price decline was “a tremendous amount of liquidation of long-term contracts” by traders who had been anticipating that a flareup in the Middle East might tighten supplies, driving prices higher.

Peter C. Beutel, an analyst at Elders Futures Inc. said the market’s own selling momentum was another factor.

Price weakness spread into the contract market worldwide where seven U.S. oil companies cut crude prices 50 cents a barrel.