Oil Prices Tumble to Five-Year Lows in U.S. Commodities Markets
STEVEN P. ROSENFELD
Jan. 03, 1985
NEW YORK (AP) _ American oil traders doubt that OPEC can keep cartel members from cheating on production and pricing, analysts said after crude oil and refined petroleum prices tumbled to five-year lows in futures trading.
West Texas intermediate crude oil, the major U.S. grade of oil, closed at $25.92 a barrel Wednesday, its lowest level since 1979.
The drop came in the first day of trading since the Organization of Petroleum Exporting Countries decided at its divisive yearend meeting to keep its benchmark grade of oil at $29 a barrel.
''The market doesn't believe that what OPEC did in Geneva will have any effect and I agree with the market,'' said William Randol, an oil industry analyst at the New York securities firm First Boston Corp.
''All the dominoes in the pricing system have already fallen,'' Randol said. ''The benchmark at $29 looks kind of silly.''
At one point Wednesday on the New York Mercantile Exchange, West Texas intermediate slid as low as $25.86 a barrel in contracts for February delivery. The close of $25.92 was down 49 cents from Friday, the last session before the New Year's break, and was the lowest level for crude oil since late 1979, said exchange spokeswoman Mary Ann Matlock.
In other contracts for February delivery, heating oil fell 2.18 cents to close at 71.14 cents a gallon, regular gasoline dropped 1.53 cents to 64.38 cents a gallon, and regular unleaded gasoline fell 1.9 cents to 66.20 cents a gallon - all the lowest levels since mid-1979.
''Most people in the oil industry are quite disappointed in the lack of progress by OPEC in stabilizing the market,'' said Edward Dellamonte, an oil analyst at the New York investment firm Prudential-Bache Securities Inc.
The drop in oil prices, and expectations of further declines, also helped boost the dollar to new heights, sent the British pound slipping to an all- time low of $1.145 and knocked the price of gold bullion to a 21/2 -year low of $302 a troy ounce.
Falling oil prices improve the prospect of controlling inflation, which makes the current high returns on dollar-denominated investments more attractive and reduces further the glitter of gold, a traditional hedge against inflation. The pound, meantime, suffers when oil prices fall because of Britain's reliance on revenue from its huge North Sea oil holdings.
Meeting in Geneva, Switzerland, last week, OPEC attempted to restore its credibility in world oil markets and to adjust its often-ignored pricing system by agreeing to hire outside auditors to keep track of member output and prices.
But the meeting adjourned without completing details of the plan and without deciding what, if any, penalties would be imposed on cheaters.
The meeting ended Saturday with Nigeria and Algeria refusing to go along with their 11 colleagues, which intensified doubts about OPEC's ability to re- exert control over oil prices.