U.S. Oil Prices End 1988 With a Sharp Gain
U.S. oil prices ended the year on a high note, making a strong advance Friday as traders scrambled to cover positions before the long holiday weekend.
The benchmark U.S. crude, West Texas intermediate, for February delivery broke through the key $17 a barrel level in late trading and ended the session at $17.24, 47 cents higher than Thursday’s close.
Peter Beutel, an analyst with Elders Futures Inc., said a late buying spurt swept prices up through key chart levels. “Traders holding short positions panicked and had to pay up to cover the positions,” he said.
Dean Witter Reynolds analyst Stephen Platt said traders were covering positions ahead of the new production agreement of the Organization of Petroleum Exporting Countries that takes effect Sunday.
‘Panic on the Close’
The accord sets a production ceiling of 18.5 million barrels a day for the first half of 1989, compared to estimated output of about 22.5 million barrels a day in December. Oil prices, which were in a slump for much of the year, made a strong recovery after OPEC clinched its output deal in late November.
The New York Mercantile Exchange closed Friday at 1 p.m EST, or about two hours earlier than usual, because of the upcoming New Year’s holiday. Trading will resume on Tuesday.
“There was panic on the close to get deals done,” said one trader. “Close to half the day’s volume was down in the last hour of trading.”
Of the 34,000 crude oil futures contracts traded Friday, about 17,000 were traded between noon and the close, according to the exchange.
January gasoline futures rose 0.87 cent to 47.88 cents a gallon, boosted by news of refinery problems at two Ashland Inc. plants as well as a decline in U.S. inventories last week, analysts said.
In European trading, oil prices also closed higher. North Sea Brent blend, the most widely traded crude, ended Friday at $16.20, a gain of 15 cents from Thursday and a full $5 above the year’s low, posted in October.
Traders said the latest Brent gains were prompted by fears of a shortage of the grade in the second half of January. Supply is tight because British output has been cut by 10% to 12% after an accident involving a storage tanker in the North Sea last weekend.
