Oil falls to lowest price in 8 months
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Manufacturing News, Source : The Manufacturer US
Published : 10 Oct 2006 21:23
Crude oil dropped to its lowest closing price since February as Saudi Arabia's state-run oil company notified customers they could expect to receive the same amount of oil in November as this month, according to Bloomberg. The move undercuts a plan by OPEC to decrease output.
Saudi Arabia, the world's largest oil exporter, told refiners in India, Japan, South Korea, and Taiwan that they will get the full quantity of oil specified in their contracts, sources said. Buyers in Europe will get the same volume as last month. On October 8, OPEC president Edmund Daukoru sent a letter calling for members to cut production by 1 million barrels a day beginning November 1.
"History shows that OPEC deals only work when the Saudis are on board," said Bill O'Grady, an analyst with A.G. Edwards & Sons in St. Louis. "Allocating the cuts is always the problem. The poor countries want the rich ones to take the hit, and the rich ones will only do that if a cut is in their best interest."
Crude oil earmarked for delivery in November fell $1.44, or 2.4 percent, to close at $58.52 a barrel on the New York Mercantile Exchange, the lowest price since February 16. Prices have fallen 25 percent from the record $78.40 reached July 14.
Saudi Aramco sells oil under annual contracts that are renewed each year. Each month buyers are told how much oil they can get the following month so they can arrange for shipment. European buyers have received 70 percent of their contracted amounts since early 2005, and that volume will remain the same in November.
Saudi Arabia accounts for approximately one-third of OPEC's output. The country hasn't officially commented on whether it will take part in any cutback in production.
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