By Myra P. Saefong and Sarah Turner, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures fell below $97 a barrel Wednesday after members of the Organization of the Petroleum Exporting Countries agreed to maintain their total production level and warned about lower economic growth next year.
Gasoline futures also fell sharply, as a U.S. government report showed that supplies last week climbed more than expected, pulling prices for the fuel down by nearly 3%.
At last check, crude-oil futures for January delivery CL2F -4.24% dropped $3.86, or 3.9%, to $96.28 a barrel on the New York Mercantile Exchange after tapping a low of $96.14.
At a meeting in Vienna on Wednesday, OPEC said members will maintain their current, total production of 30 million barrels per day, including production from Libya, which has been ramping up to pre-civil-war levels.
The cartel noted that downside risks facing the global economy continue to include “the sovereign debt crisis in the euro zone, persistently high unemployment in the advanced economies and inflation risk in the emerging economies.”
It also warned that planned austerity measures in the euro zone and in other Organization for Economic Cooperation and Development countries are “likely to contribute to lower economic growth in the coming year.”
“The bigger picture is that the latest demand forecasts from both OPEC and the [International Energy Agency] still look too high and that oil prices have further to fall,” said Julian Jessop, chief global economist at Capital Economics, in a note.
OPEC has historically set production quotas for each of its members, but on Wednesday did not set individual country quotas. A quota target for 11 of the cartel’s 12 members had stood at 24.845 million barrels per day since the last cut was implemented in January 2009.
But actual production from all of the group’s members had been estimated at 30.6 million barrels per day in November, according to a Platts survey of OPEC and oil industry officials and analysts released Monday. Read more about the Platts survey.
OPEC Secretary General Adballa Salem El-Badri said the 30-million bpd level is a “production ‘ceiling’ to which the group will abide that will also include future Libyan production,” Jason Schenker, president of Prestige Economics, wrote in a report.
A sell off
Overall, the oil markets appear to be “selling the fact,” said Phil Flynn, a vice president at PFG Best.
But Flynn said OPEC developments are actually bullish. “I think they really agreed to trim production without really saying so,” he said.
And Iran also “denied the [Strait of Hormuz] war games and that has eased tensions,” he said.
On Tuesday, oil jumped 2.4% to settle at $100.14 a barrel , as investors started to fret about supply disruption following reports that Iran could hold military drills next to a key oil-shipping channel. Read more on oil's spike on Tuesday.
Oil products traded lower along with gold.
January heating oil HO2F -2.61% fell 6.1 cents, or 2.1%, to $2.87 a gallon and January gasoline RB2F -3.65% traded at $2.53 a gallon, down 9.2 cents, or 3.5%.
Gasoline futures extended their descent along with crude oil prices after the U.S. Energy Information Administration on Wednesday reported that last week’s crude-oil supplies fell generally as expected, but gasoline’s rise in inventories came in higher than expected.
The EIA posted a decline of 1.9 million barrels in U.S. crude supplies for the week ended Dec. 9.
Motor gasoline supplies rose 3.8 million barrels, while distillate stocks fell 500,000 barrels in the latest week, the EIA report said.
Analysts polled by Platts expected a decrease of 2 million barrels for crude supplies, a rise of 2 million for gasoline and an increase of 500,000 barrels for distillates.
Late Tuesday, the American Petroleum Institute’s weekly report showed that crude-oil inventories rose 462,000 barrels last week, gasoline supplies fell 12,000 barrels and distillate supplies rose 1.2 million barrels.
Elsewhere in energy trading, January natural gas NG12F -3.66% fell by 9 cents, or 2.8%, to $3.19 per million British thermal units.
The EIA will provide an update on natural-gas stocks in storage Thursday. Prestige Economics’ Schenker expects the data to show a decline of 98 billion cubic feet.
Myra Saefong is a MarketWatch reporter based in San Francisco.
Sarah Turner is MarketWatch's bureau chief in Sydney.
