OPEC makes good on pledge to cut output, but prices fall
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OPEC today followed through on its promise to slash oil production.
The cartel’s reward: another slide in crude prices, boosting hopes for more relief for consumers at the gas pump.
Oil futures in New York were down $1.95 to $41.65 at about 10 a.m. PST as another rise in U.S. inventories offset pledged production cuts.
The price rose as high as $45.50 earlier today, then plunged as low as $40.20 on the inventory data. UPDATE: Crude futures ended the session at a new four-year low of $40.06, down $3.54.
Meeting in Algeria, oil ministers of the Organization of Petroleum Exporting Countries agreed to reduce current production by 2.2 million barrels a day.
From Reuters:
OPEC ministers agreed to their deepest output cut ever on Wednesday, slashing 2.2 million barrels per day from oil markets in a race to balance supply with rapidly crumbling demand for fuel. The cut, effective from Jan. 1, comes atop existing curbs of 2 million barrels per day agreed by OPEC at its last two meetings. It lowers the group’s supply target to 24.845 million barrels per day. ‘I hope we surprised you -- if not, we have to do something about it,’ said OPEC President Chakib Khelil, host of the conference.
Well, they just might: Oil traders focused on the U.S. Energy Department’s report that crude supplies climbed for the 11th time in 12 weeks. Inventories rose 525,000 barrels to 321.3 million last week.
‘There is nothing bullish in these numbers,’ Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York, told Bloomberg News.
As for OPEC, he said: ‘The [output cut] announcement looks big on first glance but really isn’t. They are playing with smoke and mirrors.’
‘The cut hasn’t been a surprise to anyone,’ Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Mass., told Bloomberg. With demand tumbling as the global economy reels, ‘They are chasing a smaller and smaller market, which is very challenging.’
-- Tom Petruno
Ali al-Naimi. Credit: Fayez Nureldine (AFP Getty Images)