Crude Prices Drop Sharply as Traders Dump Contracts

U.S. crude oil prices fell sharply on Monday as traders in the futures pits unloaded contracts that were expiring, traders said.

West Texas Intermediate, the U.S. benchmark crude, fell 38 cents in the spot market to $15.20 a barrel.

Britain’s Brent crude oil for loading in February was traded at $15.17 a barrel, up a bit from $15.10 at the close on Friday, as OPEC officials struggled to restore confidence in the market following last week’s disappointing production accord.

The January delivery of West Texas Intermediate was down 42 cents at $15.16 on the New York Mercantile Exchange.

“Long liquidation drove the January futures price down on the last day of the contract’s trading,” said Howard Renell, analyst with Cargill Investor Services Inc.

Oil prices had gained as much as 32 cents a barrel to $15.90 earlier in the day after Indonesian Oil Minister Subroto told reporters that OPEC’s price-monitoring committee could call an extraordinary meeting if the cartel’s $18 reference price no longer appeared defensible.

In a bright note for the cartel, Subroto said there were indications that the United Arab Emirates, among the cartel’s leading over-producers, were cutting back.

Subroto said the recent weakness in oil prices was temporary. “The fall in crude oil prices is a kind of manipulation (by oil traders) because the fundamentals of the market have not changed since oil demand has not decreased and production has not gone up in December,” he said.

He said he expected prices to stabilize around $18 a barrel, contrary to some predictions by industry experts that prices will fall under $10 in the weeks ahead.

But at another news briefing on Monday, Venezuelan Energy Minister Arturo Hernandez Grisanti blamed the drop in oil prices over the past week to a lack of confidence in OPEC’s ability to limit its own protection.

Extraordinary Meeting Unlikely

The price of West Texas Intermediate has fallen $3.15 since Dec. 14, when the Organization of Petroleum Exporting Countries rolled over its existing price and production accord for all members except Iraq.

“The confidence that OPEC has the will to comply with its decisions is being lost,” Hernandez Grisanti told reporters. “The oil market’s perception has been very negative regarding OPEC’s capacity to . . . stabilize prices.”

Oil analysts said Subroto’s remarks initially boosted prices, but traders doubt an emergency meeting will be held soon. Although the non-Arab members of OPEC would like to have an extraordinary meeting called, the Arabs are hesitant, said Nauman Barakat, an analyst with Smith Barney, Harris Upham & Co.

“Arab Gulf members fear that if they hold a meeting and it is a replay of the Vienna conference, it would be even worse for the market,” Barakat said.

Industry analysts said they expected the price of West Texas Intermediate futures to trade higher today, reflecting strength in gasoline and heating oil prices.

“I think the February crude futures contract will rebound tomorrow to regain some of its lost position in relation to oil products prices,” Cargill’s Renell said.

January heating oil futures ended the day up 0.62 cent a gallon at 49.35 cents. Gasoline for delivery in January rose 0.34 cent a gallon to 41.28 cents.