Oil, Gas Futures Plunge on OPEC Decision
Crude oil and gasoline futures prices plunged on Monday after the Organization of Petroleum Exporting Countries left production targets unchanged and virtually assured a continued glut of oil this summer.
The OPEC decision was widely expected and many in the oil market were shocked that prices fell so dramatically. Light sweet crude oil for near-term delivery settled $1.05 lower at $14.08 after dropping as much as $1.23 during the day.
“Everybody thought this had already been instilled in the market. Apparently not,” Peter Beutel, president of Cameron Hanover Inc., in Bronxville, N.Y., said of the OPEC decision. “It looks like more people thought OPEC was ready to cut.”
Prices had moved higher in recent days, partly on talk from OPEC oil ministers that the cartel might be able to manage a production cut. Indeed, a majority of OPEC ministers were in favor of tighter output, but powerhouse Saudi Arabia blocked the move.
Monday’s drop returned crude oil prices to near the five-year lows first reached late last year when OPEC similarly left production steady for the winter.
There were indications ahead of the meeting that OPEC would consider a 1-million-barrel-per-day cut in production in the April-June quarter. That was the cut sought by most of the cartel’s 12 members during the weekend meeting.
But without the support of Saudi Arabia, any cut by the 11 other members would be largely ineffective.
The oil ministers did agree to hold the pumping steady for the next nine months as they wait for economic growth and cold-weather heating needs in the Northern hemisphere to lift demand.
During warmer months, oil demand in general slackens. However, summer driving sends more people to gasoline pumps and gasoline futures prices typically rise this time of year.
But on Monday, unleaded gasoline futures for delivery next month settled down 3.17 cents per gallon at 43.31 cents on the New York Mercantile Exchange. Home heating oil for next-month delivery settled at 43.76 cents a gallon, down 2.52 cents.
