Oil Prices Fall on Fears of OPEC Overproduction

Crude oil prices fell sharply Friday as rumors of a supply squeeze faded and traders took profits amid fresh worries about overproduction by OPEC exporters.

The July contract for West Texas Intermediate, the U.S. benchmark crude, lost 62 cents to close at $19.95 a barrel on the New York Mercantile Exchange, ending off 3 cents for the week.

Trading was volatile all week, with July deliveries fluctuating in a $2-a-barrel range. Oil analysts say prices will remain volatile and could fall ahead of Tuesday’s expiration of the July contract.

In the longer term, prices are expected to sag further as traders refocus on the Organization of Petroleum Exporting Countries’ new output accord and the potential for a glut if Kuwait and the United Arab Emirates do not stick to their assigned quotas, dealers said.

The semiannual accord raised total OPEC output to 19.5 million barrels a day for the second half of 1989. But while Kuwait signed the agreement, it said it did not feel bound by its quota of 1.093 million barrels a day.

Crude prices were hammered early in the week after the OPEC meeting in Vienna, recovering later on rumors of a supply squeeze in supplies of July West Texas Intermediate crude, traders said.

But the rumor faded Friday as dealers decided that supplies were adequate, and prices again turned lower.

Gasoline prices were also off. July unleaded gasoline fell 1.3 cent to 58.14 cents a gallon on the NYMEX, its lowest point since late March.

Gasoline’s weakness stemmed from the growing perception that supplies for the usually heavy summer demand are adequate.