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| Sunday, 12 December 2004 |
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Oil price plummets, traders brush off OPEC cut NEW YORK, Saturday (AFP) World crude oil prices plummeted Friday as traders cast aside news of a modest OPEC production cut, betting that prices are now far too high as energy stockpiles expand. New York's main oil contract, light sweet crude for delivery in January, plunged 1.82 dollars to 40.71 dollars a barrel, the lowest finish since July 21. Brent North Sea crude slumped 2.29 dollars to 37.38 dollars. Determined to pound prices, traders ignored a decision by the Organization of Petroleum Exporting Countries to pare output by a million barrels a day from January 1. OPEC ministers meeting in Cairo made the cut to bring output closer to the official ceiling of l27 million barrels a day, a nominal cap, which they left unchanged. "The anticipation of an OPEC reduction in production was way, way, overdone," said Fimat USA market analyst Mike Fitzpatrick. "Once that was viewed after noon today when that communique came out, also against the backdrop of Iraq providing 750,000 extra barrels to the northern pipeline to the port of Ceyhan in Turkey, it was pretty much a wash," Fitzpatrick said. "That being the case, I think there is a general consensus in the market place that inventories are starting to replenish on a consistent basis, (that) the weather is very mild so demand is remaining low, that global economic growth is starting to slow ... and it is also affecting demand," he said. "Prices have been way out of whack and I think people want to sell going into the weekend." Oil prices began a dramatic slide 10 days ago when the United States revealed a sharper-than-expected increase in commercial petroleum inventories, particularly heating oil. In that 10-day period, the New York price has crumbled 17.1 percent and Brent 17.9 percent. The dive in prices prompted action from OPEC, which had been pumping for months at close to full capacity to try to bring down prices from record high levels which topped 55 dollars a barrel in New York in October. OPEC, which provides about 40 percent of the world's oil, said in a statement that it decided to lower output "to prevent oil prices continuing to deteriorate to an undesirably low level". "The downward trend seemed to us to be a bit too rapid, and it appeared that if we did not take this sort of decision the prices would not stabilise and we would find ourselves in a situation where we couldn't control the stability of the market," said Algeria's Energy Minister Chakib Khalil. OPEC ministers will meet again at their Vienna headquarters on January 30 to review the situation. |
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