Oil prices resumed their free-fall Monday, plummeting toward $17 per barrel for the first time since early 1979, amid fresh warnings by leaders of the Organization of Petroleum Exporting Countries that there was little chance of avoiding "a major price collapse."
A key crude oil from Britain's North Sea skidded to $16.85 per barrel in London markets, the price offered for contracts for March delivery. On the New York Mercantile Exchange, the so-called benchmark U.S. crude oil dropped $1.47 to $17.36 per barrel for March delivery.
That is a collapse of 44% since late November, when the price of West Texas Intermediate crude oil for future delivery was $31 per barrel.
Since that time, Saudi Arabia has sharply boosted production and OPEC declared a strategy of protecting its "fair market share"--another way of saying it will boost production and drive down prices in all-out competition with non-OPEC oil producers such as Britain.
Monday's renewed sharp falloff in prices after several days of relative stability was apparently touched off by the published remarks of Saudi Oil Minister Ahmed Zaki Yamani that he sees no chance of an agreement with non-OPEC nations to limit oil production.
Later, after a special OPEC committee meeting in Vienna, OPEC President Arturo Hernandez Grisanti of Venezuela warned that the only alternative to production "restraint" by all oil-producing nations was "a major price collapse."
Neither statement contradicted the prevailing wisdom of recent days, as OPEC's effort to enlist non-OPEC producers in a production-cutting agreement had been openly rebuffed by Britain and Norway. But analysts said the world's oil markets have such downward momentum that Yamani's remarks served to trigger another plunge in prices.
"It shouldn't have startled anybody, but the market is listening for bearish news," said analyst Peter Beutel of Rudolf Wolff Futures, a New York brokerage.
Yamani told an Arabic language newspaper: "I don't believe that OPEC by itself can reduce its production to a low enough level to maintain prices." He said talks with Britain and Norway "have not yielded any positive results, and no possibility of reaching an agreement is visible on the horizon."
After the markets closed in London and New York, unnamed OPEC leaders made even more pessimistic statements to journalists at the Vienna meeting. They were quoted as saying that they were prepared to drive prices as low as $10 per barrel, over the objections of some of OPEC's weaker members. The leaders apparently included Saudi Arabia.
However, the Saudi government issued a statement Monday after a cabinet meeting chaired by King Fahd that had a more conciliatory message than did its oil minister. It called for "cooperation to prevent a further drop in oil prices and bring them back to an acceptable level."
Futures Prices Near $17
Analyst Beutel likened the postures of Yamani and King Fahd to "a Mutt-and-Jeff game."
On the Mercantile Exchange, prices for future deliveries of crude dipped to $17.05 at one point Monday before settling at $17.36 per barrel. Meanwhile, at least five major U.S. producers--Exxon, Conoco, Arco, Phillips Petroleum and Texaco--again cut the prices they will pay for crude oil on a contract basis.
Contract prices, which trail future and "spot" prices, have now declined to the $21 to $24.50 range, though Exxon's new price for a grade of East Texas crude oil called Pewitt Ranch was $18.70 per barrel, down $1.50.
The Vienna meeting of OPEC oil ministers from Kuwait, Indonesia, Venezuela, Iraq and the United Arab Emirates was called to study what would be "a fair share" of the world oil market for OPEC. The meeting of the special committee, which hasn't any power to make decisions, is expected to conclude today.
Hernandez said the committee would make its recommendations to a full conference of the 13-member OPEC, though there were indications that any full-blown gathering of OPEC to act on prices wouldn't occur quickly.
United Press International quoted OPEC sources as saying an "emergency summit" scheduled for Thursday has been canceled because it might have suggested that the cartel was ready to end its price war with non-OPEC producers.
Other reports, citing a wish by OPEC to downplay any disagreements within the organization, said more generally that there aren't any plans for a full OPEC meeting to reconsider the "market share" policy enacted in December.
Such members as Nigeria, Iraq, Libya, Algeria and Venezuela are more vulnerable to the price collapse than such powerful nations as Saudi Arabia, and there are signs of new alliances being forged within OPEC that reflect the members' differing needs. Venezuela and Mexico agreed last week to begin coordinating their pricing strategies.
However, Kuwaiti Oil Minister Ali al Khalifa al Sabah denied reports of a split either in the special market-share committee or in OPEC.