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OIL FUTURES: Nymex Crude Falls On Saudi Comments January 16, 2007

Posted by notapundit in Economic News.

NEW YORK (Dow Jones)–Crude oil futures slumped to a new 20-month low Tuesday after OPEC’s most powerful member, Saudi Arabia, quashed speculation the cartel is planning to meet to discuss further production cuts.

Saudi Arabia’s oil minister, Ali Naimi, said the oil market is “very healthy” and that neither a further production cut nor an emergency OPEC meeting is needed to stem plummeting oil prices. The comments contradict talk from some other Organization of Petroleum Exporting Countries oil ministers that the cartel is looking at more cuts, even though it doesn’t look to have completely implemented cuts that were due to begin in November.

The front-month February light, sweet crude contract on the New York Mercantile Exchange settled $1.78, or 3.3%, lower at $51.21 a barrel, its lowest settlement since May 26, 2005. The session was crude’s fifth fall in six sessions and prices have now fallen 16% this year.

Brent crude on the ICE futures exchange fell 86 cents to $52.26 a barrel.

“The momentum lower is very hard to stop; it looks like it will take a deep freeze (to spur heating oil demand) or a cut by OPEC to get the attention of the market,” said Peter Beutel, president of trading advisory firm Cameron Hanover in New Canaan, Conn.

February heating oil fell 2.33 cents, or 1.5%, to $1.4803 a gallon. Front-month reformulated gasoline blendstock for oxygen blending, or RBOB, fell 6.27 cents, or 4.4%, to $1.3693 a gallon.

Heating oil’s fall was tempered by a National Weather Service outlook forecasting below-normal temperatures across the U.S. Northeast from Jan. 21 to Jan. 29. Crude’s big drop in prices this year has been partly because of mild winter temperatures in the region, which is the source of about 80% of the nation’s heating oil demand.

Despite Naimi’s comments, Venezuela, a heavy agitator for OPEC cuts announced late last year, continued to push for an emergency meeting, with the nation’s oil minister, Rafael Ramirez, saying the group is still considering getting together.

But with Saudi Arabia, the world’s biggest oil exporter, responsible for just shy of a third of the 11-member cartel’s output, Naimi’s comments hold more sway.

“No one is going to push for a meeting or further cuts if this is what Naimi is saying,” said one senior OPEC official.

“We may not be happy with these prices, but it seems that we have to grin and bear and hope things turn around,” said the official, whose country typically favors a hawkish stance within OPEC.

OPEC’s 10 members with quotas, excluding Iraq, agreed in October to cut their output by some 4%, or 1.2 million barrels a day. In December, the group met again and tacked on a further 500,000 barrel-a-day cut due to start in February. OPEC appears to have cut just 600,000 barrels a day of actual output since October and production actually climbed last month, according to the latest output survey by Dow Jones Newswires.

Following are prices for selected Nymex and ICE contracts and their comparison to values at the prior day’s settlement. Highs and lows include levels hit in overnight trade.

Prices for crude oil are in dollars a barrel and the change is in cents; prices for Nymex products are in cents a gallon and the changes are in points; prices for ICE gasoil are in dollars a ton and the change is in cents.

Nymex Prices:
Contract Settle Change Vs Low High
Feb crude oil 51.21 -178 50.53 53.55
Mar crude oil 51.96 -191 51.39 54.49
Feb heating oil 148.03 -233 146.40 151.93
Mar heating oil 150.33 -284 148.96 154.45
Feb RBOB 136.93 -627 136.00 143.86
Mar RBOB 139.98 -607 139.50 146.80

ICE Prices:
Contract Settle Change Vs Low High
Feb ICE Brent 52.26 -86 52.04 53.63
Mar ICE Brent 51.62 -183 51.20 53.88
Feb gasoil 470.25 -350 469.25 481.00
Mar gasoil 475.25 -425 474.00 486.00

By Matt Chambers, Dow Jones Newswires


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