NEW YORK — U.S. oil prices sank below $16 a barrel Wednesday for the first time in a year, pressured by OPEC's recent agreement that traders said did nothing to curb rampant overproduction.
The price of the January oil futures contract on the New York Mercantile Exchange fell to $15.96, off 67 cents on the day, after falling as low as $15.80 earlier.
For the week, oil prices have tumbled nearly $2.50 a barrel.
"There is panic selling all over the place," said a trader. A wild selling spree by traders sent preliminary volume soaring to a record 154,115 contracts--up almost 20% from the old record.
"The market has no confidence in OPEC now, and on that basis crude prices are falling sharply," said John Litchblau, president of Petroleum Industry Research Foundation Inc.
Wednesday was the first day the key spot January futures contract--which is a barometer for world oil prices--closed below $16 since Dec. 11, 1986.
On the cash market, where entire cargoes of oil are traded, a barrel of the U.S. benchmark West Texas Intermediate dropped to around $15.94. Cash market oil prices last fell below $16 on Dec. 17, 1986.
The international benchmark North Sea Brent was quoted in New York $15.55 a barrel for February delivery, down from $16.20 on Tuesday. Traders said the market was active and volatile, dealers said.
"OPEC did not address a basic issue, that they would cut production and stick to it, so prices dropped," said one trading manager of a major international oil company.
The agreement by the Organization of Petroleum Exporting Countries sets a production quota at 15.06 million barrels per day, but was not signed by Iraq, OPEC's most flagrant overproducer.
Although many traders said they expected crude oil to fall below $16 within the next few days or even weeks, they were surprised by the swiftness of the recent fall, which sent oil prices down almost $1 Monday, 80 cents Tuesday and nearly 70 cents Wednesday.
Many said the decline had been exacerbated by computerized trading programs, which sell large numbers of oil contracts when key support levels are broken.