MW: Crude futures trading near lowest since July 2004
NEW YORK (MarketWatch) -- Crude-oil futures traded Thursday near their lowest level since July 2004, as investors placed a greater emphasis on a sharp demand slowdown while shrugging off the OPEC cartel's move to slash production by a record amount.
Crude for January delivery, which expires on Friday, was down 2 cents to $40.04 a barrel in electronic trading on Globex. Earlier, the contract hit an intraday low of $39.19 a barrel.
The February crude contract, which showed greater trading volume, gained 8 cents to $44.71 a barrel on Globex.
On Wednesday, oil futures hit their lowest level since July 2004, paying little heed to a production cut of 2.2 million barrels in current oil output by the Organization of the Petroleum Exporting Countries. Janauary crude fell $3.54, or 8%, to end at $40.06 a barrel on the New York Mercantile Exchange.
OPEC agreed Wednesday to cut 4.2 million barrels a day from its actual September production level of 29.045 million barrels a day.
The reduction in member nations' quota levels is effective on Jan. 1. Excluding previously announced cuts, OPEC will actually cut its daily production by 2.2 million barrels from current levels.
"There are doubts among market participants of OPEC's ability to comply with these cuts given the magnitude of the cut and their previous history," said Nimit Khamar, an analyst at Sucden Financial.
"Yes, it is a large cut by OPEC, which is positive, but going forward oil prices will only be supported by evidence of compliance and provided weakening demand does not deteriorate too much," Khamar said.
OPEC, which controls about 40% of the world's oil production, will hold its next scheduled meeting on March 15 in Vienna.
"If prices slide toward $30, no doubt OPEC will be meeting before then and perhaps announcing further cuts, which will be required in our opinion," Khamar said.
Also on Globex Thursday, January reformulated gasoline rose 2 cents to $1.03 a gallon and January heating oil gained 3 cents to $1.47 a gallon.
Natural gas for January delivery fell 7 cents to $5.55 per million British thermal units. A U.S. government update on supplies of gas in storage last week is due out later Thursday.
