08/11/1998 10:20:48 FOCUS-Oil prices plunge to fresh 10-yr low
By William Maclean
LONDON, Aug 11 (Reuters) - Oil prices hit a fresh
10-year-low on Tuesday following a savaging triggered by
the spectre of a prolonged glut.
Brent crude was trading four cents firmer at $11.95
a barrel at 1010 GMT after sliding to a new low of
$11.87, below the previous 10-year floor of $11.90 set
Brent had slid a sharp 68 cents on Monday to settle
at $11.91 under pressure from a mountainous glut of
crude and products.
Brokers said there was no overnight news to propel
prices either way but a crippling oversupply would
continue to dominate the trading landscape.
"Anything could happen," one broker said.
The lifeblood of industrial economies has not been
this cheap in real terms for 25 years. North Sea Brent
is now about 40 percent cheaper than last year's average
The fall has slashed earnings of member states of
the Organisation of the Petroleum Exporting Countries
(OPEC), raising fears for economic growth and the
political stability of the oil-dependent producers.
London brokers GNI said that neither renewed
confrontation between the United Nations and Iraq nor
bombings of U.S. embassies in East Africa were likely to
support the market.
"The reality is that neither of these two issues is
likely to seriously interrupt the world supply of oil in
the near term," the GNI Energy Report said.
GNI and other analysts say relief for prices could
come only from strict compliance with OPEC output cuts
and a particularly cold northern hemisphere winter which
would hike demand for heating oil.
Brent crashed on Monday under the impact of rapid
losses on U.S. oil product contracts on the New York
Mercantile Exchange triggered by brimming stock levels
in the world's biggest energy market.
Brent last touched a low of $11.90 in March, which
prompted producers to make the first of two sets of
output cuts aimed at propping up prices.
Compliance by OPEC with its mandated 2.6 million
barrels per day (bpd) of cuts has been patchy, however,
with less than two-thirds adherence assessed by a
Reuters survey in July.
Oil prices had hovered around the $13 level in
recent weeks with the market weighed down by massive
oversupply resulting from rising output and a downturn
in demand in crisis-hit Asia.
But many experts do not expect any major improvement
in prices until the last quarter of the year.
Further pressure on the oil complex comes from
traders' expectations that a stand-off between the
United Nations and Iraq will be settled by diplomacy
rather than force of arms.
They also predict that any crisis would not lead to
a halt in the U.N.-monitored oil-for-food programme
under which Iraq exports around 1.6 million bpd to pay
for food and medicine.
Prices in dollars per barrel:
Aug 11 Aug 10
(1003 GMT) (close)
IPE September Brent 11.90 11.91
NYMEX September light crude 12.98 13.05