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AP
Oil Falls to 8-Month Low Below $58
Wednesday October 11, 3:02 pm ET
By Brad Foss, AP Business Writer
Oil Prices Fall to 8-Month Low Below $58 Amid Doubts That OPEC Will Soon Cut Output
WASHINGTON (AP) -- Oil prices fell to a new eight-month low below $58 a barrel on Wednesday as doubts grew that there is a consensus within OPEC for an immediate output cut.
Since July, the cost of crude oil has plunged by more than $20 amid rising global inventories, concerns about economic growth and a milder-than-anticipated hurricane season.
Against this backdrop, the president of the Organization of Petroleum Exporting Countries, Nigerian oil minister Edmund Daukoru, says there is a need -- and an agreement -- to cut production by 1 million barrels a day starting next month.
But Saudi Arabia, the country whose participation is necessary to make any significant output reduction, has not publicly confirmed this.
"The market just doesn't believe" a supply cut is imminent, said Societe Generale's director of commodity strategy Michael Guido.
Indeed, OPEC members appear to be divided over what is an appropriate price level for the cartel to try and defend by reducing its output, analysts said.
Price hawks within OPEC, such as Venezuela and Nigeria, have made it very clear over the past week -- through a barrage of public comments -- that they are quite satisfied with world oil prices hovering around $60 a barrel.
Saudi Arabia, on the other hand, has made it known -- by remaining mostly silent -- that it is not interested in attempting to prop up prices just yet.
The country's ambassador to the United States, Turki al-Faisal, said last week that Saudi Arabia seeks a "reasonable level" for oil prices that will not hurt global economic growth.
"Prince Turki's statements are the Saudi position," Nail al-Jubeir, a spokesman for the ambassador said Wednesday. Asked whether OPEC will implement a production cut at its next meeting, al-Jubeir said: "We always believe actions speak louder than words."
Analysts said the discrepancy among OPEC members about what constitutes a fair price for oil also relates to each country's dependence on oil revenues to finance their domestic budgets.
"One of the problems with high oil prices is that they have made some countries believe they're entitled to that level," said Lawrence Goldstein, president of the Petroleum Industry Research Foundation, a New York-based industry-financed think tank.
"By the way, $60 oil is still not cheap oil," Goldstein said.
Light sweet crude for November delivery fell by 92 cents to $57.60 a barrel in afternoon trade on the New York Mercantile Exchange. The last time oil settled below $58 was Feb. 15.
November Brent crude was up 28 cents to $59.62 barrel on the ICE Futures exchange in London.
The Nymex crude contract had dropped $1.44 Tuesday to settle at $58.52 -- the lowest close since Feb. 16.
The last time OPEC trimmed its output -- by 1 million barrels a day -- was December 2004 when oil traded slightly above $40 a barrel.
"The cut itself is agreed," OPEC President Edmund Daukoru told reporters in Abuja, Nigeria. He said members were "nearing consensus" on how to apportion the cuts.
Kuwait's energy minister had said Monday that OPEC was considering trimming its daily output by anywhere from 700,000 barrels to 1 million barrels.
OPEC's output quota now is 28 million barrels a day. Including Iraq, which is not bound by the quota system, OPEC's daily production is slightly below 30 million barrels.
A report from the International Energy Agency forecast the market for OPEC crude for the first quarter of next year at 29.5 million barrels a day, suggesting that supply and demand are adequately balanced.
Phil Flynn, an analyst at Alaron Trading Corp., said "a real cut in production of 1 million barrels of oil a day would be extremely bullish."
Other analysts have said prices could fall to $50 a barrel if economic growth slows and if the Northern Hemisphere winter is not particularly cold.
Oil prices peaked at $78.40 in mid-July.
In other Nymex trading, heating oil futures rose 1.21 cent to $1.693 a gallon, while gasoline prices rose less than a penny to $1.475 a gallon.
Natural gas futures fell 31.6 cents to $6.15 per 1,000 cubic feet.
Associated Press writer Mazin Elfehaid in Vienna, Austria contributed to this report.
Oil Falls to 8-Month Low Below $58
Wednesday October 11, 3:02 pm ET
By Brad Foss, AP Business Writer
Oil Prices Fall to 8-Month Low Below $58 Amid Doubts That OPEC Will Soon Cut Output
WASHINGTON (AP) -- Oil prices fell to a new eight-month low below $58 a barrel on Wednesday as doubts grew that there is a consensus within OPEC for an immediate output cut.
Since July, the cost of crude oil has plunged by more than $20 amid rising global inventories, concerns about economic growth and a milder-than-anticipated hurricane season.
Against this backdrop, the president of the Organization of Petroleum Exporting Countries, Nigerian oil minister Edmund Daukoru, says there is a need -- and an agreement -- to cut production by 1 million barrels a day starting next month.
But Saudi Arabia, the country whose participation is necessary to make any significant output reduction, has not publicly confirmed this.
"The market just doesn't believe" a supply cut is imminent, said Societe Generale's director of commodity strategy Michael Guido.
Indeed, OPEC members appear to be divided over what is an appropriate price level for the cartel to try and defend by reducing its output, analysts said.
Price hawks within OPEC, such as Venezuela and Nigeria, have made it very clear over the past week -- through a barrage of public comments -- that they are quite satisfied with world oil prices hovering around $60 a barrel.
Saudi Arabia, on the other hand, has made it known -- by remaining mostly silent -- that it is not interested in attempting to prop up prices just yet.
The country's ambassador to the United States, Turki al-Faisal, said last week that Saudi Arabia seeks a "reasonable level" for oil prices that will not hurt global economic growth.
"Prince Turki's statements are the Saudi position," Nail al-Jubeir, a spokesman for the ambassador said Wednesday. Asked whether OPEC will implement a production cut at its next meeting, al-Jubeir said: "We always believe actions speak louder than words."
Analysts said the discrepancy among OPEC members about what constitutes a fair price for oil also relates to each country's dependence on oil revenues to finance their domestic budgets.
"One of the problems with high oil prices is that they have made some countries believe they're entitled to that level," said Lawrence Goldstein, president of the Petroleum Industry Research Foundation, a New York-based industry-financed think tank.
"By the way, $60 oil is still not cheap oil," Goldstein said.
Light sweet crude for November delivery fell by 92 cents to $57.60 a barrel in afternoon trade on the New York Mercantile Exchange. The last time oil settled below $58 was Feb. 15.
November Brent crude was up 28 cents to $59.62 barrel on the ICE Futures exchange in London.
The Nymex crude contract had dropped $1.44 Tuesday to settle at $58.52 -- the lowest close since Feb. 16.
The last time OPEC trimmed its output -- by 1 million barrels a day -- was December 2004 when oil traded slightly above $40 a barrel.
"The cut itself is agreed," OPEC President Edmund Daukoru told reporters in Abuja, Nigeria. He said members were "nearing consensus" on how to apportion the cuts.
Kuwait's energy minister had said Monday that OPEC was considering trimming its daily output by anywhere from 700,000 barrels to 1 million barrels.
OPEC's output quota now is 28 million barrels a day. Including Iraq, which is not bound by the quota system, OPEC's daily production is slightly below 30 million barrels.
A report from the International Energy Agency forecast the market for OPEC crude for the first quarter of next year at 29.5 million barrels a day, suggesting that supply and demand are adequately balanced.
Phil Flynn, an analyst at Alaron Trading Corp., said "a real cut in production of 1 million barrels of oil a day would be extremely bullish."
Other analysts have said prices could fall to $50 a barrel if economic growth slows and if the Northern Hemisphere winter is not particularly cold.
Oil prices peaked at $78.40 in mid-July.
In other Nymex trading, heating oil futures rose 1.21 cent to $1.693 a gallon, while gasoline prices rose less than a penny to $1.475 a gallon.
Natural gas futures fell 31.6 cents to $6.15 per 1,000 cubic feet.
Associated Press writer Mazin Elfehaid in Vienna, Austria contributed to this report.
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