|
Crude oil prices plunge
|
 |
March 8, 2000: 5:07 p.m. ET
Prices drop 10 percent as producers signal they'll boost production
|
NEW YORK (CNNfn) - Prices for crude oil plunged more than 10 percent Wednesday, the biggest one-day drop in more than a year, after Iran and Saudi Arabia indicated to the Organization of Petroleum Exporting Countries that they will beef up production -- a move expected to send prices lower.
Crude oil for April delivery traded on the New York Mercantile Exchange fell $3.20 to $28.70 a barrel -- the biggest one-day drop since November 1998 and a day after reaching a nine-year high of $34.37 a barrel. Light crude traded on the NYMEX fell $3.03 to $31.10 a barrel.
The declines came as OPEC's two largest producers pledged "adequate and timely oil supplies" to world markets in the coming months, according to Reuters. Saudi Oil Minister Ali al-Naimi and his Iranian counterpart Bijan Zanganeh pledged to "balance the market in order to reach sustainable price levels conducive to world economic growth and market stability."
In a series of reductions that began in April 1998, OPEC, assisted by non-OPEC members Mexico and Norway, removed 4.3 million barrels of oil a day from world markets -- a move spurred by an enormous glut of excess oil and prices that fell to as low as $10 a barrel. The glut prompted declines in gasoline and heating oil prices, and helped keep prices low for wholesalers.
At the same time, those cutbacks led to a significant drawdown in oil inventories, prompting prices to rise in the past two years. So far, the cuts have reduced overall production by about 6 percent. OPEC member countries produce approximately 40 percent of the world's crude oil.
Major oil consumers such as the United States want the supply limits relaxed. With gasoline prices in the United States already above $1.50 a gallon prior to the peak summer driving season, the United States has put considerable pressure on Persian Gulf producers to boost supplies.
The producers' goal is to ease benchmark U.S. light crude back below $25 a barrel, according to some officials. On March 27, OPEC is set to decide its latest output policy that will begin on April 1 and last through the crucial summer months.
A larger-than-expected jump in crude oil stocks also sent prices plunging Wednesday, analysts said. The American Petroleum Institute (API) said crude stocks grew by 7.624 million barrels to 291.699 million barrels in the period while gasoline stocks rose 4.016 million barrels to 199.718 million. Oil markets had forecast falls in stockpiles.
"Ultimately, the Saudis will not damage their strategic relationship with the United States," said Raad Alkadiri, an analyst with the Petroleum Finance Co. He expects Saudi Arabia will seek a price range between $20 and $25 a barrel from the United States. 
|
|
|
|
|
 |
|
