NYMEX oil close sharply off amid jitters on cuts

NEW YORK, Jan 7 (Reuters) - NYMEX oil futures fell to new intra-day lows on more technical selling late Friday but also amid concern over signs of weakening compliance by key producers to global crude output cutbacks.

NYMEX February crude fell early on following reports that adherance to oil supply cuts by members of the Organization of Petroleum Exporting Countries (OPEC) fell to 74 percent in December from 81 percent in November, according to a Reuters survey, traders said.

But crude shed the losses and briefly moved into the black at midday after remarks from Venezuelan Energy and Mines Minister Ali Rodriguez, who said it would be "logical" for oil producers to extend the current output cuts beyond their March 31 expiry if market conditions remain as they are now.

The rebound was short-lived, and more selling pressured crude even more, with the week-long losses taking February crude on the New York Mercantile Exchange close to the December 1, 1999 low of $24.10 a barrel.

Crude last traded 58 cents off at $24.20 a barrel, minutes after reaching the session low of $24.15. The contract settled at $24.22, 56 cents down.

Chris Schachte of GSC Energy said more players liquidated positions in late afternoon trade as key levels were broken on the downside.

"That's part of it. The people who pushed crude up did not take it anywhere too exciting," Schachte added of the contract which traded in a wide range between $24.15 and $25.00 in helter-skelter fashion.

Rodriguez, speaking after a meeting with Mexican Energy Minister Luis Tellez, said no final decision on oil policy would be made until late February, but both ministers said they were committed to following any oil production policy that ensured price stability in the second quarter of the year.

Venezuela and Mexico, with the world's top oil exporter Saudi Arabia, masterminded last year's global oil supply cuts which drove prices to nine-year prices recently.

Crude futures had lost ground Thursday afternoon and overnight in a technical selloff, prompted partly by concern that the Tellez-Rodriquez meeting would touch on the matter of oil production increases.

Meanwhile NYMEX products had found some support from reports of a fire at Motiva's Delaware City, Delaware, refinery which had shut their 140,000 bpd crude unit. But products tracked crude's sell off later.

February heating oil last traded 1.63 cent off at 64.65 cents a gallon, barely off the intra-day low of 64.60 and a far cry from the session high of 67.10. It settled 1.53 cents off at 64.75.

February gasoline finished at 66.10 cents a gallon, off 1.79 cent on the day, which was also its settlement price. The contract had traded as low as 66.00 and as high as 69.10.

Although traders said the crude market was still looking for direction, some expressed fears of a decline below $24 a barrel if surplus Y2K related stockpiles of oil and oil products hit the market in coming weeks.

Market players had bought extra supplies of both oil and products, estimated by the Energy Information Agency at 17 million barrels, on fears the transition to the Year 2000 would cause supply disruptions. But Y2K was a non-event.

"We will have to wait and see but I am somewhat bearish. We need realignment in the market, which was partly held artifitially high by millennium fears," Schachte said.

"The futures markets are sorting themselves out somewhat but the cash markets need to do so...There's a lot of fuel out there, the EIA puts it a 17 million barrels and others see the numbers are even higher," Schachte said.

-- Edward R. (somewhere@the.morrow), January 07, 2000