ENERGY : Crude Oil Prices Fall to Lowest Level Since 1988

Crude oil prices tumbled below $16 a barrel Monday to the lowest level in 18 months on fears of a prolonged worldwide oil glut.

Oil for delivery in July slid 68 cents a barrel to $15.94 on the New York Mercantile Exchange, after dipping as low as $15.90 during the day.

The last time prices for West Texas Intermediate, the benchmark U.S. grade of crude, closed as low was in December, 1988.

Declines in Europe were less dramatic, but prices for Brent Blend crude from the North Sea, the world benchmark, slid almost 20 cents to $14.85 a barrel in London.

Traders attributed the sharp drop in worldwide oil prices to fears that OPEC will not act to reduce the current oil glut by curtailing production.

“Markets remain under pressure because there is no confirmation that key OPEC producers are cutting output to reduce the glut,” said Nauman Barakat, a vice president with Shearson Lehman Hutton.

Over the weekend, OPEC Secretary General Subroto of Indonesia was quoted as saying that members of the Organization of Petroleum Exporting Countries have cut their output by only a fraction of the amount agreed to last month at an emergency meeting in Geneva.

He said output fell only 400,000 barrels a day, rather than the 1.4 million barrels pledged in the agreement reached on May 3. The overall output level in April was 23.5 million barrels a day.

The remarks triggered a sharp decline in prices Monday, traders said. The accord was intended to reverse a decline that has taken prices down by about one-third since early January.

World demand for OPEC oil in 1990 is currently seen at around 22.0 million barrels daily, analysts said.

Unconfirmed reports that Kuwait was offering price reductions to Japanese customers similar to those reportedly pledged by Saudi Arabia two weeks ago also sent prices sharply lower, sources said.

“I’m hearing the Kuwaitis are talking with the Asian customers today,” said one trader who requested anonymity.

Trade sources have said that both Kuwait and Iran are being pressed to at least match the Saudi cuts. Trade reports that Saudi Arabia was discounting its July contract prices by up to 70 cents a barrel to Asian customers sent prices tumbling two weeks ago.

Other traders in New York said the battering in oil prices Monday was due to technical factors.