Oil Prices Sink on News OPEC Overproduced

Reports of overproduction by OPEC member nations Monday knocked oil futures prices to their lowest levels in nearly two months.

The contract for June delivery of West Texas Intermediate, the benchmark grade of U.S. crude oil, fell 58 cents to $19.44 a barrel on the New York Mercantile Exchange.

That was the lowest close for a near-month contract since March 14, when the contract for April delivery settled at $19.29 a barrel.

Members of the Organization of Petroleum Exporting Countries boosted their production last month to 20.9 million barrels a day, the authoritative Petroleum Intelligence Weekly reported Monday.

OPEC’s self-imposed quota is 18.5 million barrels a day.

The oil futures market was hit by the overproduction report and by technicians who concluded from price charts that the market was in a downtrend, said Mary Haskins of Drexel Burnham Lambert Inc.

Traders who bought contracts in hopes of a price rise sold them, while others sold borrowed contracts in the expectation of a fresh decline, she said.

The selling in the crude market spread to the market for refined products.

The June contract for unleaded gasoline dropped 2.52 cents to 64.98 cents a gallon, a decline of close to 4%, even steeper than the less than 3% drop in crude oil.

Heavy selling of unleaded gasoline futures had taken hold Friday, when the June contract had fallen 2.12 cents. Haskins said technical traders led the charge. “The bloom is off the rose for gasoline,” she said.

The contract for No. 2 heating oil fell 0.68 cent to 46.69 cents a gallon.

The downward moves of Friday and Monday were a sharp reversal from the previous two sessions, when prices surged after an announcement that repairs on a North Sea oil platform would take longer than expected.

Brent crude production in the North Sea may be disrupted until the end of May, officials said last week.