By the OGJ Online Staff
HOUSTON, Nov. 15 -- Energy prices plummeted Wednesday with the demand by the Organization of Petroleum Exporting Countries that nonmember producers cooperate in a proposed 2 million b/d cut in oil production by Jan. 1.
OPEC ministers meeting in Vienna said they would reduce their production quotas by another 1.5 million b/d if major non-OPEC producers would also cut back by 500,000 b/d to prevent further loss of OPEC's market share. OPEC members already have slashed production quotas by 3.5 million b/d, or 13%, on three earlier occasions this year while non-OPEC producers have increased production by 500,000 b/d during the same period.
The US Energy Information Administration is projecting non-OPEC oil production will increase another 1.1 million b/d in 2002, which is more than its projected growth of 800,000 b/d in world demand.
According to EIA data, Russia accounted for virtually all growth in non-OPEC production this year and is expected to add another 300,000 b/d in 2002. Other large production increases are expected from new developments in Angola and Canada, said EIA officials, resulting in declining demand for OPEC oil.
Unless Russia cooperates with OPEC in reducing world oil supplies, Saudi Arabia's oil minister Ali al-Naimi indicated that his country is ready to unleash its oil production capacity in another price war for control of world markets. A similar move in 1986 drove world oil prices below $10/bbl.
In London, the December contract for North Sea Brent crude plunged as low as $18.65/bbl before settling at $18.75/bbl, down $2.06 for the day on the International Petroleum Exchange. That market's support for $18.50/bbl and $18/bbl will soon be tested and probably broken, brokers predicted.
The December position for benchmark US light, sweet crude also fell $1.93 to $19.74/bbl on the New York Mercantile Exchange, while the January contract dropped $1.88 to $20.01/bbl. Both of those contracts continued to fall in after-hours electronic trading, down to $19.31/bbl and $19.67/bbl respectively.
Home heating oil for December delivery lost 4.81¢ to 56.12¢/gal Wednesday on the NYMEX, and unleaded gasoline for the same month was down 4.64¢ to 53.37¢/gal. The December natural gas contract dropped 12.2¢ to $2.68/Mcf.
In London, the natural gas contract for December dipped by 3.4¢ to the equivalent of $3.51/Mcf on the IPE.
The average price for OPEC's basket of seven crudes lost $1.14 to $18.09/bbl Wednesday.
Uncertainty over OPEC production in the face of falling demand and economic recession triggered aggressive selling of energy futures Wednesday, analysts said.
In London, brokers reported that market gains earlier in the week after US officials announced plans to fill the Strategic Petroleum Reserve were wiped out by the American Airlines crash in New York. Even if it has no relation to terrorism, they said, the crash erodes consumers' already shaky confidence in air travel.
The EIA's outlook for petroleum supply and demand assumes the global jet fuel market will decline by 10% during the last quarter of this year and will be down roughly 5% through 2002.
Moreover, analysts speculate that the falloff in consumer spending for flights will exacerbate the recession and further reduce demands for other forms of petroleum.
