ENERGY FUTURES : Oil Prices Swing Wildly, End Day 38 Cents Higher

With storage tanks brimming and no sign yet of stronger demand for oil, prices took a roller-coaster ride on both sides of the Atlantic on Wednesday with swings of more than $2 a barrel on the New York Mercantile Exchange.

In Europe, crude-oil futures plunged to their lowest point in more than a year. In New York, prices for oil delivered in May pulled out of a nose dive at a low of $16.25 a barrel, then soared to $18.49 before settling precariously at $18.06, up 38 cents--a range that exchange officials said might be a record.

Industry analysts and oil economists--surprised by the sharpness of the drop in world prices, which fell $2.50 a barrel in a week--warned that extreme price volatility has yet to run its course. “The key thing is that the (storage) tanks are full,” said Philip K. Verleger of the Institute for International Economics in Washington, “and a lot of tankers are headed toward the U.S. Gulf Coast.

“It’s a temporary distortion that may get a lot worse because there is no place to put the oil,” Verleger said.

U.S. storage stands at its highest level since 1982, while the 13 members of the Organization of Petroleum Exporting Countries, which produces a third of the world’s supply, are turning out crude at their highest level “in eight or nine years,” said Peter C. Beutel, energy analyst at Elders Futures in New York. At the same time, he added, demand for petroleum products remains slack. Only technical factors, such as traders in pursuit of bargain prices, sent the New York price higher, he said.

Wednesday’s decline abroad and initial plunge in New York came after the American Petroleum Institute surprised many in the industry by reporting after trading ended Tuesday that U.S. stocks grew by 8.1 million barrels last week. Many had expected inventory to begin to decline while others had forecast a a rise of no more than 3 million barrels.

But the institute put U.S. inventory at 371 million barrels, the highest level since 1982 and 45 million barrels more than a year ago.

Said Beutel, who had expected stocks to decline as refiners completed the seasonal changeover from producing heating oil to gasoline: “Refinery runs normally would be higher than they were.” Thus, he said, the increase could also signal a weakening economy.

Later Wednesday the market rebounded briefly amid rumors that OPEC might meet before its next scheduled meeting on May 25 to try to restrain production. “That was possibly a ruse to get prices up,” Beutel said.

Some analysts suggested that further price falls of up to $2 a barrel are possible, but others predicted that $16.25 would mark the bottom.

Which way the market goes may depend most on the oil cartel, said James Ritterbusch, analyst at Carson Petroleum. “Until we see OPEC demonstrate a willingness to curtail production, this down move is simply not over.” He said the price could drop below $15.

The Middle East Economic Survey, an influential Cyprus-based industry newsletter, this week pegged OPEC output last month at more than 24 million barrels a day. That is well above the cartel’s agreed ceiling of 22.1 million. Oil Daily Energy Compass, published in London, said Wednesday that there is “little indication of a significant cutback in April.”

OPEC boosted its target price to $18 a barrel late last year and the basket-price average of seven crude oils reached $20.56 as 1990 opened before prices began to slide. But some observers consider January’s price rise a “fluke” induced by extreme cold in much of North America, which created sharply higher demand for heating oil.

“We had been looking for a U-shaped oil-price curve (over the course of) this year,” said Peter Nicol at Warburg Securities. “Maybe the U is a bit deeper than we expected, but the market is not in a free fall.”