Oil Prices Drop Below $50 a Barrel
Monday, November 1st 2004, 10:48 am
By: News On 6
Oil futures prices plummeted more than $2 a barrel Monday, extending declines from a week ago that were prompted by rising inventories of crude in the United States. Traders appeared to shrug off news that a strike in Nigeria could affect output.
December crude declined by $2.01 to $49.75 per barrel in morning trading on the New York Mercantile Exchange.
``The short-term trend looks negative,'' said BNP Paribas Futures trader Tom Bentz.
Bentz added that worldwide oil supplies remain tight and that, therefore, ``I'd be a little cautious'' about declaring the beginning of the end of high prices. ``The reality is that not a lot has changed fundamentally,'' he said.
Last week, oil prices fell from record closing prices on Nymex after the U.S. government said crude supplies had increased by 4 million barrels to 283.4 million barrels. China's move to cool its red-hot economy by raising interest rates also eased pressure on oil prices.
While crude prices are still up by more than 70 percent from a year ago, they would need to surpass $90 per barrel to approximate the all-time high, in inflation-adjusted terms, set in 1980.
Recent price rises have been spurred by production outages in the Gulf of Mexico, which has resulted in nearly 26 million barrels being locked in, along with supply disruptions and unrest in key producers Nigeria, Saudi Arabia, Iraq and Venezuela.
Underlying the supply fears is the world's narrow cushion of excess capacity, currently at about 1 percent of the world's daily consumption of 82.4 million barrels, leaving little breathing space in the event of a production outage.
A record Nymex closing price of $55.17 per barrel was reached Oct. 22 and matched Oct. 26.
Nigeria's main labor union on Sunday called for a nationwide strike Nov. 16 at the country's largest petroleum producer _ Royal Dutch/Shell Group _ in a protest over local increases in fuel costs.
Royal Dutch/Shell opened court action Monday to block the threatened strike but lost a first-round bid for an interim injunction quelling the unions.
Nigeria exports around 2.5 million barrels of oil daily.