COMMODITIES : Crude Oil Futures Plunge in Wave of Panic Selling
Crude oil futures plunged Friday on the New York Mercantile Exchange amid rumors that Saudi Arabia had vetoed proposals for a special meeting of the OPEC pricing committee.
On other exchanges, contracts for future delivery of precious metals, grains, soybeans, livestock and meat all finished moderately to sharply lower, while stock index futures advanced.
Crude oil futures had rallied Thursday, after hitting their lowest levels in nearly two years, on unconfirmed rumors that the secretariat of the Organization of Petroleum Exporting Countries had called a special meeting of the cartel’s pricing committee.
Traders clung to expectations of such a meeting until Friday afternoon, when new rumors surfaced that any meeting plans had been vetoed by Saudi Arabia.
Panic selling ensued, with the contract for October delivery of West Texas Intermediate crude oil briefly touching $14.05 a barrel before rebounding to $14.18 at the close.
The contract had closed at $14.16 a barrel on Wednesday, the lowest price for near-month delivery since Oct. 29, 1986, when the near-month contract closed at $13.73.
Factors Cited
Reports that some OPEC members had produced crude oil in excess of their quotas last month were mainly responsible for the sharp drop in prices earlier this week.
But Charles J. Maxwell, senior energy strategist with the New York brokerage house C. J. Lawrence, Morgan Grenfell Inc., cited five factors underlying the bearish trend in the oil market.
The factors include the slow world economy; competition from gas, coal, nuclear and other energy sources; increased oil production in Brazil, Oman, Egypt and other non-OPEC countries; the continuing trend toward energy conservation, and discord within OPEC.
Maxwell said oil prices probably would continue to fall until OPEC members agree to firm production limits.
“If they are fearful enough and they decide to cut back production, I can see us muddling through with prices at $14 to $15 a barrel while we work off inventories,” he said.
“The disaster theory is that we go down to $9 or $10 a barrel, which would force OPEC’s hand and they would order production curbs. That would bring us up to $15 or $16 a barrel by mid-winter.”
West Texas Intermediate settled 30 cents to 51 cents lower, with the contract for delivery in October at $14.18 a barrel; heating oil was 0.88 cent to 1.10 cents lower, with October at 40.97 cents a gallon, and unleaded gasoline was 0.93 cent to 1.07 cents lower, with October at 42.06 cents a gallon.
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