Oil prices were mixed on Friday, with the New York contract expiring below US$34 a barrel, as weak global demand weighed on the market.
The benchmark contract’s expiration on Friday also prompted intense speculative action, analysts said.
The contract for New York’s light sweet crude for delivery in January expired at US$33.87 a barrel, down US$2.35 from its close on Thursday.
The contract dived to an intraday low of US$32.40, a level last seen on Feb. 9, 2004.
The New York contract for delivery in February, which becomes the market reference beginning tomorrow, finished US$0.69 higher at US$42.36.
In London, Brent North Sea oil for February delivery rose US$0.64 to settle at US$44.
“Crude fell as concerns over a global economic slowdown weighed on sentiment,” Sucden analyst Nimit Khamar said.
RACE TO SELL
Investors in the New York contract for delivery next month raced to sell before the contract expired.
Oil stockpiles in Cushing, Oklahoma, where New York oil is stored, are at maximum capacity. Incapable of parking more oil there at the end of Friday’s session, investors were forced to sell off, independent analyst Ellis Eckland said.
In response to the fresh price falls, OPEC president Chakib Khelil said on Friday the cartel would keep reducing output until prices stabilize, just days after the 13-member group approved the biggest production cut in its history.
OPEC, which produces about 40 percent of the world’s crude, agreed on Wednesday to cut output by 2.2 million barrels per day (bpd) in a bid to shore up prices.
“We will continue this reduction until the price will stabilize,” Khelil told reporters in London at a key gathering of major oil producing and consuming nations.
Khelil, who is also Algeria’s energy minister, said prices could have gone even lower if OPEC had not already made cuts in September and October.
“I think the question that people don’t ask is where would the price be today if we did not take a decision in September of reducing 500,000 [bpd] and if we did not make the decision in October to reduce by 1.5 [million bpd],” he said.
“The prices today would have been very, very low, so I think we did have an impact although we did not succeed in stabilizing,” he said.
OPEC’s output reduction, agreed this week at a ministerial meeting in Oran, Algeria, has failed to prevent oil diving to multi-year lows from record peaks above US$147 in July.
“The global recession continues to sap demand,” BetOnMarkets analyst David Evans said.
“Even after OPEC cut production by more then 2 million barrels, oil prices have fallen below the US$40 per barrel level. Prices are likely to stabilize between the US$35 and US$40 levels,” he said.
Many traders questioned whether all members of the 13-nation OPEC cartel would fully enforce the reduction.
“Skepticism about OPEC’s ability to cut output resulted in a steep fall in oil prices,” analysts at Barclays Capital said.
In London, British Prime Minister Gordon Brown said that oil price volatility was “in no one’s interest.”
Saudi Arabian Oil Minister Ali al-Nuaimi again indicated that US$75 would be “fair and reasonable,” adding that anything lower could lead to more, not less, instability.
“When oil is priced lower, such as it is now, there will be less investment and less future supply,” he said in London.