NEW YORK, DEC. 16 -- Oil prices continued plummeting today, with crude oil hitting levels not seen in nearly a year.
The slide began last Thursday amid growing belief that supplies will continue to outstrip world demand, at least in the short term. It has accelerated since Monday, when OPEC oil ministers ended their winter meeting in Vienna after failing to agree on new production quotas.
On the New York Mercantile Exchange, contracts for January delivery of West Texas intermediate, the bench mark U.S. crude, closed today at $15.96 per 42-gallon barrel, down 67 cents from Tuesday.
Since Dec. 9 the futures contract has dropped $2.59 in five sessions. It was the first time the near-month crude traded below $16 since last Dec. 17, when it closed at $15.86 a barrel.
Prices of refined oil products also dropped severely today.
Wholesale heating oil fell to 49.27 cents a gallon, down 1.73 cents from Tuesday, while wholesale unleaded gasoline fell 1.37 cents, closing at 41.70 cents a gallon.
Since the Dec. 9 close, heating oil has dropped by 5.55 cents a gallon, while unleaded gasoline has lost 5.04 cents a gallon.
"Psychologically, people are a little shell-shocked, but not so much by OPEC," said William Byers, an analyst at the Bear, Stearns & Co. "They're surprised the market went down so far, so fast."
Trading opened on a positive note, with crude climbing by as much as 32 cents a barrel over Tuesday's close before turning lower.
Chris McCormack, an analyst at E.D.& F. Man International Futures Inc., said the market was impressed by weekly statistics released Tuesday by the American Petroleum Institute, a Washington-based trade group.
"The market had been expecting a major buildup in products," he said. Despite that, gasoline stocks were lower, while production of gasoline and distillates -- diesel fuel and heating oil -- was also down. That would suggest greater demand for products, thereby supporting prices.
But Richard Redoglio, a trader with Merrill Lynch Energy Futures, offered another theory, attributing the morning's rise to "short-covering," a practice in which traders buy contracts to replace others they had borrowed and sold earlier at higher prices.
Redoglio and Byers both said selling accelerated when crude contracts for January and February broke below the psychologically important threshold of $16 a barrel.
Several major oil companies announced that they were lowering the prices they were paying for deliveries of crude.
Sun Co., Marathon Oil Co. and Conoco Inc. said they had cut their posted price for West Texas intermediate by $1 a barrel, to $16.50.
Other companies announced cuts to $17 and $17.50 a barrel.
On Monday, members of the 13-nation Organization of Petroleum Exporting Countries agreed to a six-month extension of its current price and production quotas, ending six days of fruitless bargaining over pricing and output.
The cartel voted 12 to 1 in favor of the pact, which provides for an overall limit of 15.06 million barrels a day for all members except Iraq, which said it wouldn't respect any production limits.