Oil futures plummeted Monday on international markets in a knee-jerk reaction to news reports that OPEC members might reconsider another production increase if prices remain too high.
The July contract for a blend of light sweet crudes plunged $1.12 to $28.73/bbl on the New York Mercantile Exchange (NYMEX). The August contract lost $1.09 to $28.32/bbl.
But in after-hours electronic trading, both contracts inched up to $28.83/bbl and $28.35/bbl, respectively.
At the International Petroleum Exchange (IPE) in London, the July contract for North Sea Brent fell $1.16 to $27.43/bbl on technical selling following the collapse of that market's seemingly solid support for a $28/bbl price level. That contract traded at a high of $28.60/bbl and a low of $27.19/bbl during the day.
Prices continued to slide on the Singapore Exchange, with the July contract for Brent reported down 99� to $27.60/bbl early Tuesday. The August position also lost 84� to $27.02.
The price drops apparently were triggered by a newswire report that Saudi Arabia may consider another production increase to roll back the recent run-up of world oil prices to nearly $30/bbl. That report was attributed to unnamed Saudi sources.
Speculation was fanned by a later statement by Ali Rodriguez Araque, Venezuela's energy minister and OPEC conference chairman, that the cartel could call a conference earlier than its scheduled June meeting to consider a production hike if oil prices stay too high.
Qatar's Energy Minister Abdullah Bin Hamad al Attiyah met Monday with Norwegian Energy Minister Olav Akselsen in Oslo. They later issued a joint statement that they are prepared to support all efforts for market stability.
Several officials of OPEC and other oil-producing countries, including Rodriguez Araque, had previously expressed satisfaction with the level of world oil prices in recent days and indicated they had no intention of again increasing production at the upcoming June meeting.
But brokers in London said they feared prices of $29/bbl or better could force OPEC members to change their minds about a production increase. They said the market would be more comfortable with prices around $27/bbl or lower to prevent such a move by OPEC.
"We certainly expect such speculation ahead of the OPEC June meeting and any mention of increasing production affects the prices at this stage," said a Singapore trader.
Expiration of NYMEX's June contract for light, sweet crude also helped dampen the oil future's market Monday, officials said. The resulting drop in crude futures pulled down refined petroleum products as well.
The June contract for home heating oil dropped 2.76� to 76.12�/gal, while unleaded gasoline fell 2.22� to 93.11�/gal.
Even NYMEX natural gas dipped 7.8� to $3.75/Mcf from its earlier steady climb. But the IPE June contract for gas was up the equivalent of 28� to $3.16/Mcf.
