Market watch, July 18
World petroleum prices continued to fall Monday in the wake of proposals by the Organization of Petroleum Exporting Countries and Mexico to increase oil production by 550,000 b/d sometime this month.
World petroleum prices continued to fall Monday in the wake of proposals by the Organization of Petroleum Exporting Countries and Mexico to increase oil production by 550,000 b/d sometime this month.
In a move to divide up Saudi Arabia's previous unilateral proposal, OPEC Conference Pres. Ali Rodriguez Araque warned cartel members Monday to prepare for another production increase of 500,000 b/d before the end of July if market prices remain high. That proposal would whittle down Saudi Arabia's share to 162,000 b/d of extra production.
Mexican officials subsequently announced they are ready to increase production by 50,000 b/d once OPEC makes its move.
The Saudis want to drive down prices to prevent the US and other consuming countries from developing alternative resources that would compete with the kingdom's vast oil reserves in the future. But other producers with smaller reserves are anxious to market more oil before prices fall. That scramble for markets could drive world oil prices as low as $20/bbl, said Fred Leuffer, senior managing partner at Bear, Sterns & Co., in a report issued Monday.
The August contract for the benchmark blend of light, sweet US crudes fell 57� to $30.83/bbl Monday on the New York Mercantile Exchange, while the September contract dropped 67� to $29.76/bbl. Both contracts continued to slide in after-hours electronic trading to $30.75/bbl and $29.64/bbl respectively.
The August contract for home heating oil plunged 1.64� to 79.26�/gal, while unleaded gasoline lost another 0.33� to 95.97�/gal on the NYMEX.
Natural gas for August delivery dropped 14.8� to an even $4/Mcf Monday.
In London, the September contract for North Sea Brent crude dropped 67� to $28.56/bbl, while the October contract was down 64� to $28.14/bbl. The August contract for natural gas was unchanged at the equivalent of $2.76/Mcf on the International Petroleum Exchange.
As the day ended on the Singapore exchange, Brent for September was at $28.56/bbl, down by 67� on the day, while the October position fell by 64� to $28.14.
The average price for OPEC's basket of seven crudes plunged by $1.38 to $27.46/bbl Monday.
