Oil Prices Plummet as OPEC Fails to Provide Direction

Oil prices continued to fall Monday, hitting near-five-year lows, as the Organization of Petroleum Exporting Countries (OPEC) failed to provide any direction on production reductions. The absence of a signal from a weekend meeting of Middle East oil ministers triggered a selling frenzy, pushing crude oil prices close to the five-year lows reached last December. If prices were to fall to the December low of $13.75/bbl, they would be equivalent to lows of $10.53/bbl hit in July 1986 and of $10.50 reached in April 1986, when adjusted for inflation.

Key Takeaways:

• West Texas Intermediate (WTI) crude oil futures for April delivery tumbled 47* Monday to $14.10/bbl on the New York Mercantile Exchange.
• April North Sea Brent futures plunged 41* to $13.04/bbl on London's International Petroleum Exchange, hitting a five-year low of $12.90 in February.
• Spot April WTI at Cushing, Okla., dropped 40* to $14.15, while spot April Alaska North Slope crude at the Gulf Coast was down 40* to $13.20.
• Traders are resigned to the likelihood that OPEC will simply roll over its current 24.5 million b/d production ceiling, despite actual OPEC output in February estimated at 25 million b/d.
• The unprecedented rundown of U.S. distillate stocks in January and February is being interpreted by some analysts as putting world supplies back into balance with demand and encouraging OPEC ministers to stand pat on production.

Statistics:

• West Texas Intermediate (WTI) crude oil futures for April delivery: $14.10/bbl.
• April North Sea Brent futures: $13.04/bbl.
• Spot April WTI at Cushing, Okla.: $14.15.
• Spot April Alaska North Slope crude at the Gulf Coast: $13.20.
• April No. 2 heating oil futures: 43.37* per gallon.
• April gas oil (or No. 2) futures: $137.25 per metric ton.
• Wholesale No. 2 prices: 51.59* per gallon.

Sources:

• The Oil Daily in cooperation with Computer Petroleum Corp.
• New York Mercantile Exchange
• London's International Petroleum Exchange