NEW YORK — Crude oil prices plunged below $15 a barrel for the first time in seven years Tuesday, hit by nervous trading that dealers attributed to intensified pessimism about the outlook for the oversupplied market.
The price for March delivery of West Texas Intermediate, the best known U.S. crude, fell to $14.77 for a 42-gallon barrel on the New York Mercantile Exchange, down $1.24 from the previous session's close.
Prices of other petroleum products also dropped, notably home heating oil for March delivery, down 2.68 cents to 49.88 cents a gallon, and unleaded gasoline, down 3.20 cents to 43.55 cents a gallon.
"It seems a lot of this is a momentum-type thing, panic-type selling," said Peter Beutel, assistant director of Rudolf Wolff Futures Inc., an energy futures trader in New York.
"Panic selling" is a term used to describe a market in which traders, believing prices are only headed lower, sell their oil no matter what the price.
Madison Galbraith, senior energy specialist with Merrill Lynch Energy Futures in New York, said the price slide seemed to gain a life of its own after West Texas Intermediate broke below the $15.50 level earlier in the day. "All the phones started ringing with sell orders, sell orders," he said. "I've never seen it this low since I've been in the marketplace."
Lowest Since 1979
It was the lowest price for West Texas Intermediate since the New York Mercantile Exchange began trading that grade in 1983, and industry analysts said it was the lowest price paid for any oil on the open market since early 1979, before the Iranian revolution disrupted world supplies.
Uncertainty about the outlook for oil intensified after Mexico, a non-OPEC producer, cut prices last week to an average of $15 a barrel. Some dealers also said there was anxiety because of no indication that production by other countries will decline.
More signs of a long-term slump came when three U.S. oil companies said Tuesday that they have reduced their posted prices, the contract prices they pay producers, by up to $2 a barrel for various grades of crude.
The reductions by Diamond Shamrock, Conoco Inc. and Marathon Petroleum were the latest cuts that have brought postings down to the $18-$21 range, compared to $27 to$29 a few months ago.
Prices on the open market have dropped by more than 50% since November because of a struggle between the once-mighty Organization of Petroleum Exporting Countries and non-OPEC producers.
Rich OPEC nations, led by Saudi Arabia, have been flooding the market with cheap oil to undercut competitors and get more customers.