NEW YORK, Nov. 15 (UPI) -- The orderly retreat of crude prices prior to this week's OPEC session was turned into a rout Thursday as the cartel's sudden reluctance to reduce production sent the New York Mercantile Exchange plunging to levels not seen since 1999.
Prices on NYMEX were in a virtual freefall Thursday after OPEC backed off on its plan to cut oil exports by more than 1 million barrels per day.
Trading was heavy from the opening bell on the New York Mercantile Exchange as crude for December delivery fell $2.29 to $17.45 per barrel, its lowest level in more than two years. January was off $2.17 at $17.84 per barrel.
Gasoline futures also fell with December down 4.5 cents to 48.84 cents per gallon. Heating oil -- an indicator of diesel and jet fuel prices -- lost 5.03 cents to close at 51.09 cents per gallon for December.
The benchmark Brent crude contract for December closed $1.84 lower at $17.33 per barrel on London's International Petroleum Exchange earlier in the day.
Oil prices have been in a slump for several weeks as the ongoing U.S. economic slowdown has contributed to a world oil market that is well supplied at a time when demand is falling.
Traders had expected OPEC to again trim its output in a bid to stabilize gradual falling prices, however the cartel's ministers made a somewhat surprising move at their meeting Wednesday when they agreed to cut their production by 1.5 million barrels per day only if non-OPEC producers reduced their daily output by 500,000 barrels.
News reports indicated that major non-OPEC exporters such as Russia, Norway and Mexico were willing to make only paltry cuts in production, leaving the OPEC exporters unwilling to give up their market share in a likely futile attempt to boost prices.
Russian officials said Thursday that their nation could not afford to make any substantial reductions without jeopardizing winter supplies needed by both domestic and European customers.
Mikhail Khodorkovsky, CEO of YUKOS, Russia's second-largest oil company, told reporters in Moscow that it made no sense to reduce production at a time when Russia was unable to keep up with its domestic market.
"By increasing oil output we are not taking over someone else's market, but just regaining our own," Khodorkovsky informed the Itar-Tass news agency.
Khodorkovsky predicted that Russian oil output would probably not be pulled back until prices for its Urals crude blend fell to $14 per barrel.
(By Hil Anderson, UPI Chief Energy Correspondent)
