Oil prices dropped below US$ 51,80 a barrel to new 19-month lows yesterday on a report that OPEC powerhouse Saudi Arabia said further production cuts are not necessary right now.
Crude oil has fallen more than 16 percent this year in a sell-off triggered by a historically warm winter in the Northern United States and sustained by large funds taking short positions in the market, or bets that prices will fall. Some market participants believe that another production cut by the Organization of Petroleum Exporting Countries could halt the price drop, but until that happens, there's little to stop prices from sliding further. ''It doesn't feel like it's run its course yet. It will probably fall below US$50 a barrel ÃÂ¢€" then the Saudis may be more amenable to an emergency meeting,'' said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. Light sweet crude futures for February fell US$1.59 to settle at US$51.21 on the New York Mercantile Exchange, after hitting a low of US$50.53 in earlier trading. Yesterday's settlement price was the lowest since May 26, 2005, when crude closed at US$51.01. February Brent crude on London's ICE Futures exchange fell 86 cents to settle at US$52.26 yesterday on London's ICE futures exchange. Nymex crude's losses yesterday were sparked by comments from Saudi Oil Minister Ali Naimi that diminished the chance of an emergency OPEC meeting this week ÃÂ¢€" a possibility that had boosted prices Friday. The Nymex was closed Monday for the Martin Luther King Jr. holiday. ''There is no need now (for further cuts) on the basis of what market conditions are,'' Dow Jones Newswires quoted Naimi as saying after he arrived in New Delhi for an international conference organized by India's Oil Ministry. The comment followed a call on Monday by Venezuela's oil minister Rafael Ramírez for an emergency OPEC meeting to push for another cut. OPEC in recent months has committed to a total cut in output of 1.7 million barrels per day, including a 500,000 barrel-a-day reduction set to begin February 1. Compliance is believed to be half-hearted. According to Dow Jones Newswires, independent surveys suggest OPEC has cut output by little more than half of its pledged levels. Production remains near 27 million barrels a day or about 700,000 barrels a day above OPEC's target. ''It is not that OPEC is not capable of 100 percent compliance, but trying to support prices at such high levels invites non-compliance. There is no urgency to cut output,'' wrote Peter Beutel of Cameron Hanover in a research note. This is because prices are still high in historical terms, so OPEC members continue to pull in big profits. The last time crude oil traded at US$40 a barrel was in 2004, but Beutel noted that for roughly 94 percent of OPEC's history, its daily sales have been at prices below US$40 a barrel. Buenos Aires Herald