After a week of frenzied trading, oil prices went into another tailspin this morning after Saudi Arabia's oil minister issued a public warning that prices could fall below $15 (U.S.) a bbl, disrupting the world economy.
North Sea Brent crude, which was selling on the cash market late Wednesday afternoon for $20.05 a bbl, this morning hit levels as low as $18.35 for March delivery.
West Texas Intermediate the benchmark United States crude, opened at $18.75 a bbl for March delivery on the NEW YORK MERCANTILE EXCHANGE, where it had closed at $20.39 Wednesday. Trading later in the morning hovered around $19.
The latest panic, after the market had shown signs Wednesday of settling around the $20 a bbl mark, was in response to comments by Saudi Arabia's AHMED ZAKI YAMANI that prices could plummet further unless ORGANIZATION OF PETROLEUM EXPORTING COUNTRIES (OPEC) and nonOPEC nations agree on a system for restraining production.
Without some agreement, "there will be no limitation to the downward price spiral which may bring crude prices to less than $15 a bbl, with adverse and dangerous consequences for the whole world economy," the oil minister said in an interview with OPECNA, the official news agency of the cartel.
On Wednesday the TORONTO STOCK EXCHANGE piled up its biggest one day slide in more than four years as the TSE 300 composite index the widest measure of stock market activity in Canada fell 55.42 points to close at 2,758.80.
It was the largest singleday loss since Sept. 24, 1981, when the dollar was nudging the 80-cent (U.S.) mark, bank prime rates were hovering around 20% and the Ottawa Alberta energy agreement took its toll on oil stocks. The 300 index dived 84.10 points that day.
However, on a percentage basis, the 1981 loss was much greater than Wednesday's battering because share prices today are significantly higher.
In New York, the Dow Jones average of 30 industrials stood at 1,502.29 at the close of Wednesday's trading session, dawn 12.16 from the previous day.
Large oil companies were hit hard by the continuing downward pressure on oil prices. On the TSE, IMPERIAL OIL LIMITED fell $1 to $46, SHELL CANADA LIMITED fell 5/8 to $21.7/8 and TEXACO CANADA INC. slid 3/8 to $22 7/8.
Yesterday, Imperial's marketing arm, ESSO PETROLEUM CANADA, joined Shell and PETROCANADA in cutting the price it is willing to pay for high quality Alberta light oil.
Esso is now offering between $31.31 and $31.41 a bbl (depending on battery location) for Swan Hills South crude, down $3.97 a bbl from its Jan. 10 posting and a far cry from the $39.52 a bbl it was paying in November.
In similar reductions earlier this week, Shell lopped $3.81 a bbls off its price for light crudes and PetroCanada reduced its postings by $4 a bbl.
A spokesperson for Texaco's supply and distribution department in Calgary said this morning the company will issue a new bulletin effective Friday that knocks $4.45 a bbl off its previous Jan. 1 postings.
The cuts by Canadian refiners followed a week long trading bath in which the price of the United States marker crude - West Texas Intermediate has tracked middle East and North Sea oil downward by 17%.