Market watch: International oil prices plumb new 2-year lows
By the OGJ Online Staff
HOUSTON, Nov. 6 -- Oil futures prices continued falling to new 2-year lows in international markets as traders ignored threats of both production cuts and price wars by members of the Organization of Petroleum Exporting Countries.
OPEC Sec. Gen. Alí Rodríguez Araque said Monday that member ministers probably would cut the group's production quotas by as much as 1.5 million b/d at their Nov. 14 meeting instead of 1 million b/d as has been anticipated.
In a more balanced market, such a statement would have triggered a rally in oil prices.
However, the December contract for benchmark US sweet, light crudes -- already down to the lowest price level in more than 2 years -- lost another 16¢ to $20.02/bbl Monday on the New York Mercantile Exchange. The January contract also retreated by the same amount to $20.24/bbl. Both contracts regained a few cents in after-hours electronic trading to $20.09/bbl and $20.26/bbl, respectively.
Home heating oil for December delivery dropped 0.7¢ to 57.56¢/gal Monday on the NYMEX, while unleaded gasoline for the same month lost 0.61¢ to 53.79¢/gal. The December natural gas contract plummeted 32.6¢ to $2.92/Mcf.
In London, futures prices for North Sea Brent oil broke through previous market support at $19.50/bbl on Monday and hit a 2-year low under $19/bbl in early trade Tuesday on the International Petroleum Exchange.
The December Brent crude contract closed at $19.44/bbl Monday, down 33¢ for the day after trading in a range of $19.16-$19.95/bbl. It dropped another 52¢ to $18.92/bbl in early trading Tuesday. The last time North Sea Brent traded below $19/bbl on the IPE was in July 1999, market sources reported.
Monday, the December natural gas contract inched up 3.3¢ to the equivalent of $3.25/Mcf on the IPE.
The average price for OPEC's basket of seven crudes remained at $17.81/bbl Monday, unchanged from Friday.
Rodríguez and most other OPEC leaders claim it's imperative to halt the collapse of world oil prices that would virtually wipe out the new investment necessary to meet future demand projections. But they have said any additional production cuts must be based on cooperation by nonmember oil producing nations -- at least to refrain from increasing production to capture OPEC's market shares.
Traders and analysts say that is not likely in today's low-price market, with growth in world demand for oil at the lowest rate in 17 years.
However, Qatar's energy minister warned Tuesday that another price war may be looming if OPEC can't win the cooperation of non-OPEC producers to reduce production. Instead, low-cost producers with huge reserves, such as Saudi Arabia, could crank up output to flood world markets with even cheaper oil, as it did in the late 1980s to the disadvantage of high-cost non-OPEC producers.