Crude oil in New York plunged to the lowest in more than 19 months after Saudi Arabia's oil minister rejected calls for more production cuts.
The Organization of Petroleum Exporting Countries must wait to assess the effect of supply curbs that start Feb. 1, the minister, Ali al-Naimi, told reporters in New Delhi. Prices have plunged 16 percent this year, leading Venezuela and Algeria to call for OPEC to restrain output.
``The Saudis don't see the need to take any immediate action, which just reinforces the bearish sentiment in the market,'' said Kyle Cooper, director of research at IAF Advisors in Houston. ``If the Saudis don't want OPEC to make further cuts it won't happen.''
Crude oil for February delivery fell $1.78, or 3.4 percent, to $51.21 a barrel on the New York Mercantile Exchange, the lowest close since May 26, 2005. Futures touched $50.53, the lowest intraday price since May 25, 2005. Prices are down 23 percent from a year ago. There was no floor trading in New York yesterday because of the Martin Luther King Jr. holiday.
I'm fond of mentioning the market will do everything it can to humble you -- and it has a hell of a lot of tools at its disposal. Well, on January 89 I wrote that OPEC's discussions may give oil a price floor. Boy was I wrong.
I was watching Bloomberg TV earlier today and heard the Wachovia analyst mention OPEC's previous cuts were not fully implemented yet. This was why OPEC is not looking to cut production again. He also mentioned that stockpiles of oil are high right now, further depressing prices.
It is looking like technically, the big up-coming price level is $50/bbl.