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Opec’s output cut fails to prevent record price fall 2

United Kingdom
23/12/2008
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Opec reasserted its efforts to increase oil prices last week when it agreed the largest single production cut in the cartel’s history at its Extraordinary Meeting on 17 December 2008. Opec announced a 2.2m barrel a day (b/d) cut, in addition to the 2m b/d it has pledged since September. It agreed to cut 4.2m b/d from its September output of 29.045m b/d, bringing its production ceiling to 24.845m b/d in January. These latest developments are likely to be of particular interest to businesses in the oil industry, especially producers and consumers.

However, the announcement failed to inhibit the plummeting oil prices. Oil prices plunged 26.8% last week to $33.87 a barrel, down 77% from the record peak in July, the steepest decline in history. Since the $100-a-barrel level was reached for the first time on January 2, crude has dropped 65%, on track for a record annual decline. The price fall was exacerbated by the expiry on Friday of the January US futures contract, and oil for delivery in February still fell 13.8% during the week.

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