By the OGJ Online Staff
HOUSTON, Jan. 18 -- US oil futures prices dropped below $18/bbl Thursday for the first time in 2 years as traders continued to worry about lower demand and increased inventories.
The market will remain weak until it sees some noticeable effect of the nearly 2 million b/d production cut promised by the Organization of Petroleum Exporting Countries and five nonmember producers, said analysts.
Implementation of production cut commitments could put a floor under crude prices and set the stage for later gains by triggering a sharper draw down of inventories in the first quarter and a shallower build up of stocks in the second quarter, officials of the International Energy Agency said Friday.
Some traders said the market may already be oversold at present price levels and could be ripe for recovery.
The February contract for benchmark US light, sweet crudes fell 89¢ to $17.97/bbl Thursday on the New York Mercantile Exchange. The March contract also dropped 85¢ to $18.63/bbl. However, both positions recouped somewhat in after-hours electronic trading, moving up to $18.24/bbl and $18.85/bbl respectively.
Unleaded gasoline for February delivery plunged 2.24¢ to 53.61¢/gal during the regular NYMEX session. Home heating oil for the same month lost 1.76¢ to 51.45¢/gal, while the February natural gas position declined 14¢ to $2.25/Mcf.
The day's losses generally wiped out earlier gains this week.
In London, futures prices for North Sea Brent oil crashed through the $19/bbl level to as low as $18.23/bbl before recovering slightly in afternoon trading on the International Petroleum Exchange. Brokers said that drop will likely trigger additional technical selling.
The March Brent crude contract closed at $18.41/bbl Thursday, down 62¢ for the day. The February natural gas contract lost just under 5¢ to the equivalent of $3.65/Mcf on the IPE.
The average price for OPEC's basket of benchmark crudes declined 28¢ to $17.47/bbl Thursday.
World oil production totaled 76.5 million b/d during December, down 120,000 b/d from November, IEA officials reported. Iraq's oil production fell by 770,000 b/d as a result of its dispute with United Nations officials over its oil-for-aid program, while total production among the other 10 members of OPEC increased by 380,000 b/d.
Unseasonably mild weather dampened North American demand for oil and petroleum products during the fourth quarter of 2001, just as a European cold spell boosted that market, said IEA officials. That should keep estimated world demand growth steady at 100,000 b/d for last year, they said.
The IEA is still projecting that world demand for oil will increase by 600,000 b/d this year if the US and global economies gather momentum by midyear.
