New York, July 17 (Bloomberg) -- Crude oil fell almost 4
percent and gasoline fell to its lowest price in almost four
years, on expectations that it will take months for oil
producers' output cutbacks to end a world inventory glut.
Venezuela Energy and Mines Minister Erwin Arrieta said
yesterday that agreements to cut output should boost price by
November, meaning prices could stay low for some time yet.
Arrieta's comment followed a statement by Kuwait's oil minister
last weekend that it could take six months for prices to rise.
''It's going to take a lot of time and it's irrational to
think otherwise,'' said Abe Glass, a trader at Spear, Leeds &
Kellogg in New York. ''They've got to rein in the supply side.
We're forecasting higher prices, but is that going to happen in
two to three quarters or will it be four to six quarters?''
August crude oil fell 57 cents, or 3.9 percent, to $13.95 a
barrel on the New York Mercantile Exchange, its biggest one-day
drop since July 6. In London, September Brent fell 29 cents, or
2.2 percent, to $12.80 a barrel.
August gasoline fell 0.70 cent, or 1.5 percent, to 44.81
cents a gallon, the lowest closing price for a contract nearest
to expiration since Sept. 28 1994.
August heating oil dropped 1.03 cents, or 2.7 percent, to
37.48 cents a gallon.
Oil producers, including both Organization of Petroleum
Exporting Countries and non-OPEC countries, initially said
agreements to cut output by 4.3 percent would push prices up in
the third quarter.
By the end of June, cuts by 10 members of OPEC had totaled
1.12 million barrels a day, short of the 1.245 million barrels
those nations pledged, according to Bloomberg estimates. The cuts
began in April and are measured against February production.
Iraq, whose production is governed by the United Nations and is
not a part of the agreement, has raised production since February
by 250,000 barrels a day, offsetting some of those cuts. Another
1.5 million barrels a day in cuts have been promised beginning in
July for OPEC and non-OPEC producers in the pact.
Kuwait's Oil Minister Sheikh Saud Nasser al-Sabah said last
weekend that he doesn't expect oil prices to recover for at least
six months, the official Kuwaiti news wire KUNA reported.
Meantime, Iraqi President Saddam Hussein said in a television
address to his nation that he will shake off United Nations
sanctions, and that he is ready to fight Western
''conspiracies,'' the Associated Press reported.
While Hussein didn't say what actions he would take if the
UN didn't remove sanctions by December, it was the first time he
has set a specific deadline, the AP said. There is concern that
Hussein may be preparing for another confrontation with the UN,
which governs the amount of oil Iraq can sell under an oil-for-
food accord.
The sanctions, put in place by the UN after Iraq invaded
Kuwait in 1990, can't be lifted until weapons inspectors certify
that the country no longer has weapons of mass destruction or . Iraq
produced about 2.6 percent of the world's oil in June.
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