Brent crude for November delivery was trading at dollars 19.30 per barrel last night, down 15 cents on the day and and showing a fall of 8 per cent from dollars 21 in mid-
The slide continued as Shell Oil, the US arm of the Royal Dutch Group, announced that it was shedding about 6,000 jobs as part of a two-year plan to reduce its workforce by 20 per cent.
The industry has been taken aback by the slippage in oil prices. 'To see them coming off as you go into winter is extraordinary,' said Peter Bogin of Cambridge Energy Research Associates in Paris. 'It just caught everyone by surprise.'
A senior Arab oil industry official was also baffled. 'Fundamentals did not change. So what did change? Somebody decided that they should sell,' he said.
Geoff Pyne, an analyst with UBS Phillips & Drew, thought the market was worried about the increasing rate of Opec production, which is running at 25.1 million barrels per day, compared with the 24.2 million agreed at an Opec ministers meeting last month.
'Kuwait and Iran are ratcheting production up,' he said. 'At the moment all the incremental supply is being absorbed by increased seasonal demand, but that will turn down at the end of the year.' Demand usually peaks in December, after which users are prepared to let their stocks run down through the rest of the winter.
Mr Bogin said he thought Iran would shortly allow production to slip back, after a brief demonstration period during which it boosted production to 4 million bpd. 'If Iran does lower its production and November is cold, prices will at worst stabilise,' he said. The only scenario in which prices would fall much further was an exceedingly mild winter.
However, technical analysts said the drop below dollars 19.50 for December Brent on the International Petroleum Exchange almost certainly meant that the market would not be able to re-enter the dollars 19.50 to dollars 21 range it has held for the past five months.
For nearly a week traders have been nervously waiting for a fall below the dollars 19.50/55 area, which has been the floor to the market's activity since June. 'It's too early to really talk of a new range, but dollars 19.60 to dollars 18.20 might be a reasonable guess,' said Chris Chaitow, technical analyst at Credit Lyonnais Laing in London. 'The short and medium-term trends are negative. It looks as though the trend is down and there is another dollar or so to go.'
Shell's staff cuts highlight the problems facing oil companies. It had originally set a target of a 15 per cent reduction in July 1991, but continued difficult trading conditions have forced it to make further cuts in its staff of 29,400.
So far, about 2,700 jobs have been lost by the disposal of some of the group's unwanted businesses. Earlier this year Shell sold a coal mining company to Ziegler for dollars 1bn, which removed 2,300 from its payroll.
Another 400 jobs have gone with the contracting-out of Shell's credit card processing operations. The remaining job losses are expected to be achieved by early next year through further disposals and redundancies.
'In light of the continuing difficult industry environment, we have taken further steps to improve our cost structure,' Frank Richardson, Shell Oil's president, said.
The move came as Shell Oil returned to a dollars 28m net profit for the third quarter of 1992, against a dollars 14m loss at the same time last year. The nine-month profit is up from dollars 43m to dollars 405m. Capital expenditure has, however, been cut from pounds 2.2bn to dollars 1.7bn in the nine- month period.
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