Oil prices closed at less than $47 a barrel on Tuesday as news that OPEC made only two-thirds of its pledged output cuts last month outweighed a rebound in the U.S. stock market. New York light sweet crude for January dropped $2.32 to close at $46.96, the first time the benchmark contract has settled below $47 since May 2005.
“The story about OPEC still not in full compliance with pledged output reductions is the reason why crude futures are down right now,” said Phil Flynn, an analyst at Alaron Trading in Chicago. “This lack of compliance is disappointing to the market and this puts into doubt OPEC’s indications that they will make more production cuts later this month.” Members of the OPEC had pledged to lower output by 1.5 million barrels per day for November, but were only 66 percent compliant with the target last month.
Oil prices have plummeted amid the global financial crisis from record highs hit on July 11: 147.27 dollars in New York contract and 147.50 dollars in London. “There is still a fear that the global economy is in deep trouble and the oil price is simply following that,” said Adam Sieminski, analyst at Deutsche Bank. Oil prices fell more than five dollars Monday after OPEC decided at a weekend meeting in Cairo against cutting production, preferring to wait until December before reducing crude exports.
World prices for oil futures continued to fall. On the stock market price of oil fell another 6.3% and established by the end of the day below 70 U.S. $ / bbl. In New York, at the official price of NYMEX futures Light, Sweet Crude Oil (November) fell 4 cents to $ 69 and settled at around 69.85 U.S. $ / bbl. In London InterContinental Exchange Futures Europe (ISE Futures Europe) official price of IPE Brent Crude futures lost 4 to $ 48 cents and settled at around 66.32 U.S. $ / bbl.
On Thursday, oil prices declined in the tenth time since the beginning of this month. The cause was a significant increase in U.S. stockpiles of crude oil and gasoline, while energy demand in the country over the previous year dropped significantly due to the economic crisis.
Meanwhile, the leadership of the OPEC has decided to postpone the extraordinary meeting of oil ministers of countries – participating in the international oil cartel on 24 October. Initially the event was scheduled for 18 November in Vienna. The reason to postpone the meeting at an earlier date has been accelerated the fall in world oil prices. Including the OPEC oil basket for the first time in 13 and a half months fell below 70 U.S. $ / bbl.
World market prices for oil on July 22, 2008 at the leading oil exchanges declined significantly. Official oil futures prices coming month deliveries were: at the InterContinental Exchange Futures – 129,55 US$/bbl. (IPE Brent Crude); at the New York Mercantile Exchange – 127,95 US$/bbl (Light, Sweet Crude Oil).
The price of oil began the session mildly lower on expectations that Tropical Storm Dolly wouldn’t disrupt oil operations in the Gulf of Mexico. The advance increased after comments from a Federal Reserve official sent the dollar higher against major currencies, a trend that in turn sends commodities lower.
Lower oil prices are diverting attention from earnings for the moment. There’s no questions about some negative earnings reports coming out, but we’re starting to think some of them might be company specific and not broader.
The Minister of Energy Sam Bodman said at a press conference in Jeddah (Saudi Arabia) that high oil prices are primarily caused by insufficient production, not speculation in the market. Saudi Arabia, which is currently the largest oil exporter in the world, can increase production “black gold” to 12.5 million barrels a day by the end of 2009.
Oil doubled in the past year, touching a record $139.89 a barrel on June 16, as investors bought commodities to hedge against a weakening U.S. dollar and concern mounted that demand is growing faster than supply. At least 24 airlines failed this year because of rising costs, while $4 gasoline in the U.S. sparked concern the economy may slip into recession.
The market needs between 3 million and 4 million barrels a day of spare oil production capacity, compared to the 2 million barrels a day currently available, Sam Bodman said.