Oil prices resumed their slide Monday, and OPEC announced it was dispatching the cartel's new secretary general to talk with leaders of the United Arab Emirates about turning down their oil spigot.
Crude prices tumbled 68 cents a barrel to the lowest close since late 1986, hurt by a selloff that traders blamed on too much supply and renewed skepticism about OPEC's ability to restrain production.
The decline to $14.78 a barrel on the New York Mercantile Exchange erased gains made last week that had been based on fears of supply disruptions caused by the oil platform explosion in the North Sea.
That price for the benchmark U.S. crude, West Texas Intermediate, meant that spot prices for OPEC crudes are closer to $13 a barrel--nearly 30% below the cartel's now-abandoned "official" price of $18.
The relentless fall in prices, despite the rig explosion and several other developments that normally would buoy the market, underscored the severity of the oil glut as the U.A.E. and several other members of the Organization of Petroleum Exporting Countries openly flout their production quotas.
OPEC's official news agency said General Secretary Subroto would fly to the U.A.E. to deliver a message to President Sheik Zayed ibn Sultan al Nuhayan "concerning the current oil market situation."
The announcement followed a meeting in Vienna between Subroto and Rilwanu Lukman of Nigeria, the cartel's president. The visit confirms expectations of an activist role for Subroto, an influential former Indonesian oil minister who filled the long-vacant OPEC position on July 1.
Although the U.A.E. have long been one of OPEC's biggest cheaters, they have now abandoned any pretense of following the assigned quota. With Iraq, that meant two of the cartel's biggest producers are defying OPEC, leaving it with little credibility.
The announcement that Subroto was on his way to the U.A.E., and that a special meeting of OPEC's pricing committee might follow, might in the past have reversed the fall in prices. But on Monday, it interrupted the steep slide only briefly.
Traders said that when the market failed to sustain higher prices on the OPEC report, others were persuaded to sell, bolstering apprehension that crude could fall to $14 a barrel and even less in the weeks ahead.
"I think the market needs to see something of substance," said Chris McCormack, an energy futures trader with the New York investment firm Drexel Burnham Lambert Inc. "The rhetoric of OPEC is ridiculous. Every trader considers it ridiculous. . . . The market is awash in crude, and the focus has returned to that."
The $14.78 close on the Merc was the August-delivery price for West Texas Intermediate crude, down from $15.46 Friday. It was the lowest closing price for the near-month crude contract since a $14.71 close on Nov. 3, 1986.