Crude Oil Prices Slide on News of Release; U.S. Retail Gas Drops Too

Oil prices continued to slide lower Monday as speculators fled the market after Friday’s decision by the Clinton administration to release oil from the country’s emergency reserves. It’s a move the U.S. hopes will bolster supplies amid growing concern about the global economic effects of high crude prices and dangerously low U.S. reserves of home heating oil.

Crude oil for November delivery lost $1.11 to close at $31.57 a barrel on the New York Mercantile Exchange. That’s down 20% from Wednesday’s intraday high of $37.80--the highest near-term contract price since the Gulf War--and the lowest closing price for West Texas intermediate, the U.S. benchmark, in five weeks.

In other developments:

* The average U.S. retail gasoline price fell for the first time in six weeks, dropping 1.4 cents in the last week to $1.548 a gallon, the Energy Department reported, based on a weekly survey of 800 gasoline stations. The California average price for self-serve regular gasoline was unchanged at $1.832 a gallon. The nation’s average price for diesel fuel hit a record high, rising 0.4 cent from last week to $1.657 a gallon.

* Members of the Organization of Petroleum Exporting Countries, gathering for a meeting in Caracas, Venezuela, sent conflicting signals about the release of oil from the U.S. Strategic Petroleum Reserve. Oil superpower Saudi Arabia signaled its support for the action, but Abdullah Salem Badri, head of Libya’s state oil company, said the U.S. acted prematurely by tapping the emergency reserves and not waiting for extra supplies from the cartel.

* The U.S. began accepting bids for oil from the Strategic Petroleum Reserve, but at least one refining company thinks it will be of little help. “We can’t process the new crude,” said William Greehey, chief executive of San Antonio-based Valero Energy Corp., the second-biggest independent U.S. refiner. “All the refineries in the U.S. are running at near 100% of capacity.”

Energy Secretary Bill Richardson said Friday that the government will release 30 million barrels of oil during a 30-day period from the 571-million-barrel Strategic Petroleum Reserve, aiming to shore up supplies and stave off potential shortages of heating oil as winter approaches.

“It’s a significant volume of oil,” said the International Energy Agency’s executive director, Robert Priddle. “It’s obviously more than the last increase in production announced by OPEC. It’s obviously going to have a downward effect.”

But the lasting effects on prices remain a subject of debate.

Said Michael Fitzpatrick, a trader at Fimat USA Inc. in New York, “We don’t really know if this will change the supply situation. It may just change perceptions.”

The administration move followed calls for such action by Vice President Al Gore and was immediately criticized by Republican presidential contender George W. Bush as an election-year ploy.

European Union finance ministers will meet Friday to discuss whether to release oil from their emergency reserves, a European Commission spokesman said.

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Bloomberg, Reuters and Bridge News services were used in compiling this report.