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Oil prices down before ensuing OPEC meet |
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June 18, 2000
CHICAGO, (AP) - Crude oil prices cooled off Friday on the New York Mercantile Exchange as investors placed their bets on a substantial production increase by OPEC when the cartel's ministers meet next week in Vienna.
In other markets, butter prices extended a retreat and coffee fell to a new eight-month low.
After rocketing over $33 a barrel this week on uncertainty over OPEC's intentions, oil prices were down as much as $1.75 at one point Friday, sliding to $31.20, on signs the cartel's production will be raised by at least a half-million barrels a day.
Amid continuing uncertainty, crude for July delivery recovered to finish 62 cents lower for the day at $32.33 a barrel.
While the Organization of Petroleum Exporting Countries remained mum about a decision cartel leaders claim to have already made, Indonesian officials said OPEC would raise production by 500,000 or more barrels a day. Analysts say the increase could wind up being as high as 1.2 million barrels.
Either way, it should help tamp down the demand that has helped drive prices back up.
The meeting at Vienna, Austria, is set for June 21.
Also pressuring prices was the decision by the U.S. Department of Energy to lend oil from the Strategic Petroleum Reserve to a Chicago refinery near St. Charles, La. The move is aimed at preventing further losses of gasoline supply.
With supplies tight, the market is particularly vulnerable to price spikes from refinery disruptions.
A price correction was deemed inevitable after a rally that had taken prices 11 percent higher in a week.
"It was a profit-taking extravaganza today," said Phil Flynn, senior energy analyst for Alaron Trading Corp. Along with the Energy Department's move and the latest talk, "an incredible run this week led traders to take profits," he said.
The price of North Sea oil also slumped. August Brent crude fell $1.04 to $28.35 on the International Petroleum Exchange in London.
In other energy commodities traded in New York, July heating oil fell 3.20 cents to 74.24 cents a gallon, July unleaded gasoline fell 2.25 cents to $1.0655 a gallon and July natural gas rose 2.5 cents to $4.488 per 1,000 cubic feet.
Butter, which trades only three days a week on the Chicago Mercantile Exchange, continued a dramatic price swing that began Wednesday.
The sudden appearance of 24.3 million pounds of butter in the exchange-monitored supply totals - a warehouse had either failed to report the amount or under-reported - added rare volatility to the dairy market.
The price dropped 10 cents a pound on Wednesday and sank an additional 4 cents to $1.18 a pound on Friday. Market analysts said there's no sign the slippage is over.
"I suspect it will go down another 8 to 10 cents," said Jerry Dwyer, editor of the Dairy and Food Market Analyst newsletter. "But it should correct within a few weeks. Demand is very strong."
The inventory adjustment called into question the whole system of reporting upon which farmers depend for pricing of their milk.
Coffee sank to an eight-month low for a second straight day following a report, released after markets closed Thursday, showing supplies still on the increase. Warehouse stocks are at their highest level since 1994.
July coffee fell 0.90 cent to 87.25 cents a pound on New York's Coffee, Sugar and Cocoa Exchange.
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