Oil futures prices swung violently Monday, indicating the basic instability of the market, and closed sharply lower.
Heating oil led the charge on the New York Mercantile Exchange, first soaring to the highest ranges allowed for daily trading, then plunging down close to the limit.
There was virtually no fresh news to send prices careening from one extreme to the other, analysts said, although the opening strength was attributed to higher prices in London and cold weather in Europe and the United States.
After fairly good buying early in the session, said John Hill, an analyst in New York with Merrill Lynch Commodities, "everybody looked around and said, 'Hey, what are we doing owning this stuff?' "
"It was a very volatile market and it has to do with poor fundamentals," said Ed Dellamonte, an analyst in New York with Prudential Bache Securities. "And it's not going to go away for a long time.
"We're going to see wide swings until we get some agreement for less production."
Large Swing in Trading
Heating oil was trading under expanded daily limits of 3 cents a gallon, but the March contract, on which there is no limit, swung through a range of almost 9 cents.
Crude oil traded over a range of more than $2 a barrel.
Crude oil settled 90 cents to $1.25 lower, with the contract for delivery in March at $16.78 a barrel; heating oil was 2.82 cents to 4.44 cents lower, with March at 50.72 cents a gallon.
In a related development Venezuela, a member of the Organization of Petroleum Exporting Countries, lowered its oil prices another notch as the 13-nation cartel prepared to hold an emergency summit in mid-March in Geneva to discuss the sharp price slippage on world markets.
Arturo Hernandez Gristanti, OPEC president and the Venezuelan oil minister, met for the second day Monday with Norway's oil minister in a bid to persuade independent producers to cooperate with OPEC in stabilizing prices.
Union Pacific Corp.'s Champlin Petroleum Co. reduced the price it will pay for key U.S. crude by $1 to $19 a barrel--the lowest level since 1979. Mobil dropped its posted price by $2 to $22.75 a barrel.
Britain's Crude Rises
On the European spot market, where oil is sold to the highest bidder, Britain's prime Brent crude Monday rose 60 cents to $18.75 a barrel. But on the New York Mercantile Exchange, domestic crude for March delivery fell by 90 cents to $16.78 a barrel. Regular leaded gasoline dropped by 2.17 cents and home-heating oil by 4.44 cents a gallon.
Industry sources said Venezuela, a founding member of OPEC and the third-largest U.S. foreign oil supplier, has slashed its benchmark heavy crude by $4.50 to $14.30 a barrel.
Venezuelan Energy Vice Minister Hernan Anzola announced Sunday that the government had instructed the state oil monopoly, Petroleos de Venezuela, to set oil prices at market levels to maintain exports at 1.41 million barrels a day.
A spokesman in the New York office of Petroleos de Venezuela said: "We have received word of some price changes from Caracas by phone, but we are unable to identify specific changes because we have not gotten an official telex."
A Caracas oil analyst said the latest decrease included a $3-a-barrel reduction Feb. 1 on heavy crudes--which are not subject to OPEC pricing policy.