OPEC Slashes Production; Crude Continues to Tumble

October 24, 2008 - 8:22 AM
<br />
Vienna, Austria (AP) - OPEC said Friday it will slash oil production by 1.5 million barrels a day to stop tumbling crude prices, but the cost for a barrel of crude plummeted 7 percent to prices last seen in June of 2007.

Demand for crude has evaporated amid a global economic spiral, and the supply levers held by the Organization of Petroleum Exporting Countries appears to have little influence in the current climate.

Crude is selling for 50 percent less than this year's historic heights and has fallen $40 in the last month.

Benchmark crude futures fell $4.57 to $63.27 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. Prices had fallen as low as $62.85.

OPEC statement Friday reflected alarm over the erosion of revenues for oil producing nations, as did the unusually short deliberations leading to its decision.

"Oil prices have witnessed a dramatic collapse _ unprecedented in speed and magnitude," the 13-nation organization said. "This slowdown in demand is serving to exacerbate the situation in a market which has been oversupplied with crude for some time."

The cut announced is already sizable. But because OPEC nations continue to overproduce by about 300,000 barrels a day from the official quota of close to 29 million barrels, the total amount that the 13-nation group wants to take off the market is even greater _ around 1.8 million barrels a day.

And OPEC officials signaled they were prepared to slice deeper quickly if crude continues its freefall.

Friday's meeting was called unexpectedly in response to prices that have disintegrated since their historic high of nearly $150 in July. OPEC President Chakib Khelil said the organization was ready to convene another emergency session before its next planned gathering in December in Algeria "if there are further decisions that have to be made."