Oil Prices Retreat as Skepticism Rises About OPEC Cuts
Oil prices slumped by as much as 34 cents a barrel Friday amid mounting skepticism that OPEC ministers, gathering in Vienna for their semiannual conference, will be able to negotiate production cuts to reduce the global oil surplus.
With prices under pressure from skeptical traders, the cartel is faced with a critical test of wills as it prepares to meet here today to try to agree on measures to stabilize the world oil market.
Oil futures prices fell in New York Friday to their lowest levels in nearly three months. The July contract for West Texas Intermediate, the U.S. benchmark grade, slid nearly 34 cents to close at $16.73 a barrel on the New York Mercantile Exchange, its lowest since March 22. The price fell 26 cents Thursday.
July-delivery North Sea Brent blend, the most widely traded international crude oil, declined 40 cents to $15.80 by early evening in New York.
In spot trading on the U.S. Gulf Coast, where oil is sold to the highest bidder, West Texas Intermediate slid 30 cents to $16.95 a barrel.
The meeting of the Organization of Petroleum Exporting Countries is expected to focus on whether to extend the production quotas that limited the cartel’s output to 15.06 million barrels a day during the first half of the year.
The quotas were adopted last December by 12 of the 13 OPEC nations. Iraq refused to join in the accord. Iraq insisted on production parity with Iran, its enemy in the 8-year-old Persian Gulf war. Iran was allocated a quota of 2.3 million barrels a day.
At the current meeting, Kuwait and other gulf producers are likely to press for a production increase despite the potentially depressing effect on prices, ministerial sources said.
Other OPEC producers, led by Algeria and Libya, are expected to push for deep cutbacks in production to bolster prices.
“The whole reason the market slumped was over uncertainty about OPEC’s intentions in Vienna,” said Jay Amberg, crude-pricing editor at the Oil Buyers’ Guide in Lakewood, N.J.
Amberg said uncertainty kept oil markets “on hold and that leads to apathy. Prices have a tendency to decline during periods of apathy.”
In addition, Amberg cited a growing perception that there is not much OPEC can do to support prices.
“There’s plenty of oil in the world right now,” he said.
