Oil Prices Slide at End of a Wild Day

Oil prices rallied and then plunged Wednesday as Hurricane Ivan shut down oil operations in the Gulf of Mexico and OPEC ministers boosted the cartel’s production target.

Prices jumped in early trading after ministers of the Organization of the Petroleum Exporting Countries, meeting in Vienna, raised the official daily output target by 1 million barrels to 27 million, starting Nov. 1. Since OPEC already is pumping 27.5 million barrels daily to meet soaring demand, analysts dismissed the move as a symbolic gesture.

Then, the U.S. Energy Department reported that the nation’s inventory of crude oil fell in the latest week, which analysts attributed in part to Ivan’s disruption of imports and refining. Traders at first responded to that news by lifting prices above $45 a barrel.

But prices suddenly turned lower as some traders took profits and others waited to see the hurricane’s effect on the Louisiana coast, a key U.S. entry point for crude-oil imports.

In the end, light crude oil for October delivery settled at $43.58 a barrel, down 81 cents, on the New York Mercantile Exchange.

“Today’s market was absolutely baffling,” said John Kingston, global oil director for Platts, an energy information division of McGraw-Hill Cos. Prices rose on the OPEC news, which normally might be bearish, and fell despite the hurricane and inventories, trends that normally would be bullish, he said.

The boost in OPEC’s production target -- coming only a month after oil sold for a record $48.70 a barrel on the Nymex -- mainly was seen as the cartel’s way of reaffirming that it wanted stable oil markets.

To be sure, OPEC has enjoyed a huge windfall from this year’s price gains. But the 11-nation group, which pumps about one-third of the world’s oil, also is concerned that high prices could weaken economies in the U.S. and elsewhere, jeopardizing future demand for its oil.

“It’s a gesture of goodwill to the consumers that we want lower prices,” Algerian Energy Minister Chakib Khelil said.

OPEC refrained from raising its production even more because the group is pumping nearly flat-out and, with the exception of Saudi Arabia, doesn’t have much spare capacity. As a result, OPEC’s decision is unlikely to push U.S. gasoline pump prices lower and thus shouldn’t affect motorists, analysts said.

“It’s entirely symbolic and translates into nothing by way of actually impacting the physical fundamentals of the oil market,” said analyst Seth Kleinman of consulting firm PFC Energy.

Prices have soared this year because world supplies remain tight at the same time demand is rising steadily, especially in the U.S. and Asia. Some analysts and OPEC itself also attribute as much as $15 of oil’s per-barrel price to fears that terrorism or political unrest could disrupt oil supplies somewhere in the world.

Now, the weather is playing a role. Hurricane Ivan probably was a key reason U.S. crude oil inventories fell 7.1 million barrels, or 2.5%, to 278.6 million barrels in the week ended Friday, analyst L. Bruce Lanni of investment firm A.G. Edwards & Sons said in a note to clients.

The trade publication Oil Price Information Service said the market already “has seen a loss of about 51% of offshore output in the Gulf of Mexico and the likely delay of tankers into Gulf Coast ports.” California doesn’t rely on Gulf Coast imports for its gasoline needs.

Associated Press was used in compiling this report.