6/15/98 Crude-Oil Futures Settle Below $12 For First Time In Nearly 12 Years
NEW YORK -(Dow Jones)- Crude-oil and petroleum-products futures finished broadly and sharply lower Monday on the New York Mercantile Exchange, as front-month crude tumbled to its lowest level in nearly 12 years amid the continuing turmoil in Asia and the possible lifting of sanctions against Iraq.
July crude oil fell $1.03 to settle at $11.56 a barrel. At its worst, July crude sank to $11.42 a barrel, the lowest price for crude oil futures since July 1986. Front-month crude futures were less than $2 off the all-time low of $9.75, set in April 1986. August crude oil dropped 86 cents to end at $13.03 a barrel. Among products: July unleaded gasoline finished down 1.36 cents at 44.94 cents a gallon. July heating oil closed down 1.42 cents at 36.70 cents a gallon.
July natural gas added 6.5 cents to settle at $2.100 per million BTUs.
Since June 4, when oil ministers from the Organization of Petroleum Exporting Countries' Saudi Arabia and Venezuela and non-OPEC Mexico proposed to cut oil production by 450,000 barrels a day to support oil prices, crude oil futures have lost 24% of their value. Other OPEC producers have added around 140,000 barrels a day in cuts since that day, but the market has shrugged them off.
"OPEC is going to have to come up with more cuts," said Scott Ryll, an energy analyst with GSC Energy, a trading firm in Atlanta, who added that the historically low prices may be the prod that spurs producers to action. "These prices are causing an awful lot of pain in some producing countries."
Analysts said news that an end to Iraq sanctions may be in sight sparked Monday's sell-off, and technicals took over later. "To think that Iraq sanctions will be lifted after more than seven years - that added to the market's bearish psychology in a big way," said Tom Bentz, an energy analyst with Cresvale International. "We keep setting new lows and setting off stop-loss orders." Another analyst added: "No one has the courage to buy crude. I have players wanting to buy, but they're afraid to do so."
A statement Monday by chief U.N. weapons inspector Richard Butler that the possibility of lifting sanctions against Iraq is closer now than at any time in the past was the latest bearish news item. "The light at the end of the tunnel is more visible than at any time," Butler said at a news conference prior to his leaving Baghdad. Butler, concluding his five-day visit to Iraq, said he agreed to a two-month timetable with Iraqi authorities, at the end of which he hoped all remaining issues over arms inspections will be resolved.
It isn't clear how long it will take to lift the sanctions, should Iraq prove compliant with arms-inspection resolutions, but most analysts speculated that it wouldn't take long.
The immediate impact of the sanctions lifting on oil supply will be minimal. Iraq is already producing at near capacity to meet its $5 billion sales quota every six months under the Iraq-United Nations oil-for-food deal. But the psychological importance of the news is significant.
"Within a very short time, Iraq could be exporting another 1 million barrels a day of oil, depending on how fast it can repair and upgrade its oil infrastructure," said Victor Yu, an energy analyst with Refco Inc. The country is currently exporting around 1.7 million barrels oil oil a day. |
