Updated from 2:29 p.m. ESTCrude futures dropped again Tuesday after a Saudi official downplayed the need for OPEC to plan further production cuts to boost the price of oil. Nearby contracts for light, sweet crude closed down $1.78 at $51.21 a barrel on the New York Mercantile Exchange. The oil exchange-traded fund iPath Goldman Sachs Crude Oil ( OIL) also moved lower, giving up 2.8%. The price of natural gas rose 4 cents to close at $6.64 per million British thermal units. Heating oil was at $1.48 a gallon, down 2 cents, while gasoline dipped 6 cents to $1.37. Saudi oil boss Ali Naimi said new OPEC crude output reductions might not be needed. He also said there was no need to panic about the steep decline in futures in recent weeks. Last week market watchers speculated that the cartel might hold an emergency meeting to lower production on top of the cuts announced already, which so far total 1.7 million barrels a day. But it appears that member countries may not have been as compliant as had first been hoped. "OPEC seems to be losing credibility in terms of production cuts," says Jason Schenker, an economist at Wachovia in Charlotte, N.C. "Slowly the production is rising," and there is "ubiquitous cheating" among members, he says.
However, he does see a light at the end of the tunnel. "It seems unlikely we'd enter the driving season without
crude prices going up," he says. In the meantime, says Schenker, the falling oil prices are helping improve the profitability of the distillate products. As for energy stocks, Constellation Energy Partners ( CEP) added 0.6% after Wachovia initiated coverage of the stock with an outperform rating. UBS trimmed its price forecast on ethanol producers Verasun Energy ( VSE) to $21 a share from $28 and on Aventine Renewable Energy ( AVR) to $23 from $28. The stocks traded down about 6% and 8%, respectively. Major oil producers Exxon Mobil ( XOM) and BP ( BP) were off 1.4% and 2.1%, respectively. BP was lower after a panel led by former Secretary of State James Baker issued a report that was critical of the company's safety procedures. The panel was established after a 2005 explosion at a BP refinery in Texas killed 15 workers.