News

For the second time in less than three months, OPEC is considering calling an emergency meeting to rescue plunging crude oil prices. It’s enough to give oil traders a sense of deja vu, harkening back to October when futures prices swirled amid a flurry of will-they or won’t-they headlines.

Prices swayed in a broad $1.45 range Friday on the OPEC talk, settling $1.11 higher, at $52.99 a barrel, heading into a holiday weekend which shuts New York Mercantile Exchange floor trade Monday.

But the first gain after four straight declines hasn’t eased market nerves. For OPEC, the feeling of a rerun scenario in the market dates back further - to the 1998 price crash that slashed oil prices in half, to $11 a barrel.

Back then, it took two years and several output cuts by the Organization of Petroleum Exporting Countries to restore prices to levels before that crash, brought by an OPEC decision in Jakarta to raise output quotas by 10%, the start of the Asian economic crisis and an extremely warm winter caused by a strong El Nino weather phenomenon.

OPEC, which has already pledged to cut 1.2 million barrels a day from Nov. 1 to combat the 25% fall in prices between July and October, said it has learned the lesson from Jakarta, and will act aggressively to avoid a replay.

Nymex crude oil futures staged a stuttering 6% rally after OPEC agreed on the Nov. 1 output cut and ministers, in December, pledged to slash a further 500,000 barrels a day from Feb. 1.

But prices have moved relentlessly lower since the start of 2007, prior to Friday’s rebound. Nymex crude futures hit a 19-month low of $51.88 a barrel at Thursday’s settlement, a plunge of 15% from the year-end price Dec. 29 of $61.05.

Filed under: Business by lrenz