atprm
12-02-2008, 09:32 AM
Oil plunges below $50 after Opec fails to cut
By Javier Blas and Miles Johnson in London
Published: December 1 2008 10:16 | Last updated: December 1 2008 16:33
Oil prices on Monday fell below $50 a barrel for only the second time this year after Opec delayed a further production cut until mid-December.
The oil cartel, which controls 40 per cent of the world’s production, said demand was weakening fast with the global economic crisis but it agreed to wait until a meeting in Oran, Algeria, on December 17 to further reduce its output.
In late trade, Nymex January West Texas Intermediate fell $5.15 to $49.28 a barrel.
ICE January Brent fell $5.52 to $47.97 a barrel.
Abdalla El-Badri, Opec secretary-general, said the cartel was heading for a cut. “We are all geared towards a cut in Algeria...There will be action there.”
The cartel has promised to lower its production by about 2m barrels a day in the past two months but analysts said it had so far cut about 1m-1.2m b/d.
Ed Meir, of MF Global in New York, said that, in spite of knowing that the oil markets were oversupplied, Opec decided to pass on making any quota cuts at its weekend meeting in Cairo. “Apparently, Gulf producers insisted on stricter compliance of existing cuts before new ones were introduced,” Mr Meir said.
The drop in oil prices was exacerbated by signs of sharply lower manufacturing activity worldwide in November, traders said.
Oil products were also lower. Nymex January RBOB gasoline dropped 8.9 cents to $1.1197 per gallon while Nymex January heating oil dropped 10 cents to $1.6270 a gallon.
The drop in prices came in spite of a signal over the weekend from King Abdullah of Saudi Arabia, the world’s largest oil producer, that he wanted oil prices to rise back to $75 a barrel.
Olivier Jakob, of Swiss oil consultancy Petromatrix, said that the king’s comments marked a significant departure from the previously held line that the price is set by the market.
“If the king wants crude oil to be at $75 a barrel, the words need to be followed by action and this weekend’s gathering of Opec ministers did not provide any new signs of that,” he said.
The drop in energy prices led a broader retreat in commodities prices as data showed lower manufacturing activity in November. The Baltic Dry Index, a benchmark for shipping bulk commodities such as iron ore, coal and grain, fell 2.1 per cent to 700, the lowest level since January 1987 as demand for raw materials weakened further.
The index has traded lower only for a brief period in 1986.
Gold prices fell following the drop in oil prices, which reduces inflationary fears, and the strengthening of the US dollar against the euro.
Spot bullion in London fell 5.1 per cent to $773.30 a troy ounce. Silver, platinum and palladium also dropped.
Suki Cooper, an analyst at Barclays Capital said the change in gold prices had not been accompanied by a significant change in fundamentals.
“Gold prices had gained upward momentum over the past few sessions so we could potentially be seeing some profit-taking, which could have been triggered on the back of the dollar strengthening a little bit.”
Agricultural commodities were mostly sharply down. Coffee posted a small gain.
CBOT March corn fell 14 cents to $3.51¼ a bushel while CBOT March wheat dropped 34½ cents to $5.25½ a bushel.
By Javier Blas and Miles Johnson in London
Published: December 1 2008 10:16 | Last updated: December 1 2008 16:33
Oil prices on Monday fell below $50 a barrel for only the second time this year after Opec delayed a further production cut until mid-December.
The oil cartel, which controls 40 per cent of the world’s production, said demand was weakening fast with the global economic crisis but it agreed to wait until a meeting in Oran, Algeria, on December 17 to further reduce its output.
In late trade, Nymex January West Texas Intermediate fell $5.15 to $49.28 a barrel.
ICE January Brent fell $5.52 to $47.97 a barrel.
Abdalla El-Badri, Opec secretary-general, said the cartel was heading for a cut. “We are all geared towards a cut in Algeria...There will be action there.”
The cartel has promised to lower its production by about 2m barrels a day in the past two months but analysts said it had so far cut about 1m-1.2m b/d.
Ed Meir, of MF Global in New York, said that, in spite of knowing that the oil markets were oversupplied, Opec decided to pass on making any quota cuts at its weekend meeting in Cairo. “Apparently, Gulf producers insisted on stricter compliance of existing cuts before new ones were introduced,” Mr Meir said.
The drop in oil prices was exacerbated by signs of sharply lower manufacturing activity worldwide in November, traders said.
Oil products were also lower. Nymex January RBOB gasoline dropped 8.9 cents to $1.1197 per gallon while Nymex January heating oil dropped 10 cents to $1.6270 a gallon.
The drop in prices came in spite of a signal over the weekend from King Abdullah of Saudi Arabia, the world’s largest oil producer, that he wanted oil prices to rise back to $75 a barrel.
Olivier Jakob, of Swiss oil consultancy Petromatrix, said that the king’s comments marked a significant departure from the previously held line that the price is set by the market.
“If the king wants crude oil to be at $75 a barrel, the words need to be followed by action and this weekend’s gathering of Opec ministers did not provide any new signs of that,” he said.
The drop in energy prices led a broader retreat in commodities prices as data showed lower manufacturing activity in November. The Baltic Dry Index, a benchmark for shipping bulk commodities such as iron ore, coal and grain, fell 2.1 per cent to 700, the lowest level since January 1987 as demand for raw materials weakened further.
The index has traded lower only for a brief period in 1986.
Gold prices fell following the drop in oil prices, which reduces inflationary fears, and the strengthening of the US dollar against the euro.
Spot bullion in London fell 5.1 per cent to $773.30 a troy ounce. Silver, platinum and palladium also dropped.
Suki Cooper, an analyst at Barclays Capital said the change in gold prices had not been accompanied by a significant change in fundamentals.
“Gold prices had gained upward momentum over the past few sessions so we could potentially be seeing some profit-taking, which could have been triggered on the back of the dollar strengthening a little bit.”
Agricultural commodities were mostly sharply down. Coffee posted a small gain.
CBOT March corn fell 14 cents to $3.51¼ a bushel while CBOT March wheat dropped 34½ cents to $5.25½ a bushel.