Crude Oil Prices Plummet in Wake of Saudi Move

ByABC News
July 5, 2000, 7:04 AM

V I E N N A,  Austria, July 5 -- Oil prices shed more ground today as dealers braced for extra oil from Saudi Arabia and a few fellow OPEC producers after Riyadhs surprise vow to increase exports.

London Brent blend futures settled 20 cents lower at $29.35 a barrel having hit a low of $28.55. U.S. light crude was off $1.83 a barrel at $30.67.

The downward move came after Saudi Arabia announced its intention to put an extra half-million barrels per day onto the market very soon if prices do not sink toward a target of $25 per barrel.

The frenzied selloff on the New York Mercantile Exchange occurred on the first trading day after Mondays announcement by the worlds leading oil-producing nation, which caught even fellow OPEC membersby surprise. The exchange was closed Tuesday in observance of the Independence Day holiday.

Prices for Other Fuels Fall

And in a development that bodes well for motorists complaining of soaring gasoline prices, other energy products also were knocked sharply lower by crudes fall.

Prices of gasoline contracts dropped 7 percent and heating oil and natural gas contracts each dipped 4 percent, although such changes generally take a few weeks to affect the retail market.

Analysts say gasoline prices, which have soared largelybecause of crudes ascent, could fall by a dime or more beforeLabor Day as a direct result of the Saudis decision if it iscarried out.

If the Saudis go ahead, we could see prices near $25 inSeptember, said Anthony Karydakis, senior economist at Banc OneCapital Markets in Chicago. James Glassman, senioreconomist at Chase Securities in New York, agreed. The Saudi decision will help bring prices down by fall andthis should help unwind some of the energy price pressures thatdrove up prices earlier this year, he said. But some experts think even another 500,000 barrels a day will fail topush prices significantly lower. It will stopthe heat from the market. It might bring the price down only by$1 or $2, maximum, said Zaki Yamani, a former Saudi oil minister. I would be surprised if it [falls] to $25 because the market needs much more oil.