OPEC cut fails to halt oil slide, prices come to 17 months low
Saturday, 25 October 2008
LONDON, Oct 24 (Agencies): Oil slid nearly $5 a barrel Friday as gloom about a global economic downturn that is sapping fuel demand took the steam out of an OPEC agreement to cut output.
Ministers of the Organisation of the Petroleum Exporting Countries agreed at an emergency meeting in Vienna to take 1.5 million barrels a day of crude, about 5 per cent of its supply, off the world market.
US light crude for December delivery traded down $4.80 at $63.04 a barrel.
Earlier it touched $62.85, its lowest since May 2007.
It has fallen $42 a barrel in a month.
London Brent crude was down $4.42 at $61.50.
Saudia Arabia's Oil Minister Ali al-Naimi said the group had agreed the output reduction with effect from November 1.
Traders said OPEC's action might not be enough to arrest a slide that has seen oil down more than 50 percent from a record $147 a barrel in July.
OPEC, which accounts for 40 per cent of global oil supply, that the bottom appears to be falling out of the market.
Crude is selling for 50 per cent less than this year's historic heights because the worldwide economic crisis has put a huge crimp in demand.
Oil ministers had been expected to cut between 1 million and 2 million barrels a day at Friday's emergency OPEC meeting in Vienna, Austria.
"Oil prices have witnessed a dramatic collapse - unprecedented in speed and magnitude," said a statement from the 13-nation organisation announcing its decision after unusually short deliberations. "This slowdown in demand is serving to exacerbate the situation in a market which has been oversupplied with crude for some time."
But prices sagged after the decision, suggesting that the market was more concerned with the economic turmoil reaching into all corners of the globe than with crude availability.
If economies in the US and other leading crude consumers continue to deteriorate, industries will use less oil, making it a buyer's market. The cut was also smaller than several OPEC members had called for.
"With so many economies in trouble, OPEC has to be careful not to kill off crude demand," said Peter McGuire, managing director at investment firm Commodity Warrants Australia in Sydney, who expected a cut between 1 million and 1.5 million barrels a day. Iranian Oil Minister Gholam Hossein Nozari said earlier Friday a cut of 2 million barrels a day would stabilise prices that have fallen more than 50 per cent since peaking in mid-July. Libyan oil chief Shokri Ghanem told reporters that OPEC needed to make a "huge cut."
Ministers of the Organisation of the Petroleum Exporting Countries agreed at an emergency meeting in Vienna to take 1.5 million barrels a day of crude, about 5 per cent of its supply, off the world market.
US light crude for December delivery traded down $4.80 at $63.04 a barrel.
Earlier it touched $62.85, its lowest since May 2007.
It has fallen $42 a barrel in a month.
London Brent crude was down $4.42 at $61.50.
Saudia Arabia's Oil Minister Ali al-Naimi said the group had agreed the output reduction with effect from November 1.
Traders said OPEC's action might not be enough to arrest a slide that has seen oil down more than 50 percent from a record $147 a barrel in July.
OPEC, which accounts for 40 per cent of global oil supply, that the bottom appears to be falling out of the market.
Crude is selling for 50 per cent less than this year's historic heights because the worldwide economic crisis has put a huge crimp in demand.
Oil ministers had been expected to cut between 1 million and 2 million barrels a day at Friday's emergency OPEC meeting in Vienna, Austria.
"Oil prices have witnessed a dramatic collapse - unprecedented in speed and magnitude," said a statement from the 13-nation organisation announcing its decision after unusually short deliberations. "This slowdown in demand is serving to exacerbate the situation in a market which has been oversupplied with crude for some time."
But prices sagged after the decision, suggesting that the market was more concerned with the economic turmoil reaching into all corners of the globe than with crude availability.
If economies in the US and other leading crude consumers continue to deteriorate, industries will use less oil, making it a buyer's market. The cut was also smaller than several OPEC members had called for.
"With so many economies in trouble, OPEC has to be careful not to kill off crude demand," said Peter McGuire, managing director at investment firm Commodity Warrants Australia in Sydney, who expected a cut between 1 million and 1.5 million barrels a day. Iranian Oil Minister Gholam Hossein Nozari said earlier Friday a cut of 2 million barrels a day would stabilise prices that have fallen more than 50 per cent since peaking in mid-July. Libyan oil chief Shokri Ghanem told reporters that OPEC needed to make a "huge cut."