Nymex Crude Hits New 8-Month Low; OPEC Doubt

LIMA Oct 11, 2006 (Dow Jones Newswires)

New York crude oil futures slumped Wednesday to a new eight-month intraday low amid speculation OPEC doesn't have major producer Saudi Arabia on board for output cuts, despite the cartel's president saying all members agreed on a 1 million-barrel reduction.

Prices came under further pressure after U.S. oil producers and refiners joined those in Asia and Europe in saying crude oil allocations from Saudi Arabia for November were kept mostly unchanged from the month before. The statements contradicted reports last week that the kingdom was moving to cut November volumes.

The front-month November light, sweet crude contract on the New York Mercantile Exchange was down 76 cents to $57.76 a barrel after falling as low as $57.55, equaling its intraday low on Feb. 16. A fall below this level would send prices to their lowest since December, when prices went as low as $56.95 a barrel. Brent crude on the ICE futures exchange fell 47 cents to $58.87 a barrel.

November heating oil fell 59 points to $1.6750 a gallon. Front month unleaded gasoline fell 1.18 cents to $1.4550 a gallon and reformulated gasoline blendstock, or RBOB, fell 45 points to $1.4822 a gallon.

"I don't think we are going to get the full 1 million barrels of cuts and I don't think the Saudis want to" go along with them, said Peter Beutel, president of trading advisory firm Cameron Hanover in New Canaan, Conn.

Prices fell despite Organization of Petroleum Exporting Countries President Edmund Daukoru, who is also the Nigerian oil minister, saying all members of the cartel agreed on the need for a 1 million barrels-a-day production cut.

Still, with more than a week since Venezuela and Nigeria announced they were pursuing production cuts and little comment from Saudi Arabia, doubt is setting in about whether the kingdom, by far the cartel's biggest oil exporter, has agreed to any production cut.

"This whole thing is looking more and more like a Nigerian and Venezuelan scheme" to turn output cuts they would have had to make regardless into full-blown OPEC cuts, Beutel said.

Beutel said the only comments from Saudi Arabia on the cuts so far have been from its ambassador to the U.S., Turki al-Faisal, who said the kingdom is still committed to helping reduce oil prices.

"It may be that Prince Turki's comment was their position - after 25 years of watching (oil markets) I know these are people not accustomed to repeating themselves," Beutel said.

Also weighing on prices, the International Energy Agency Wednesday trimmed its global demand growth expectations for this year and next to their lowest levels yet. Still, the IEA did note that upward demand revisions were possible.

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