Oil prices weakened in Asian trade yesterday with OPEC’s decision to cut supply at a time of global financial turmoil seen as further hurting already weak energy demand, dealers said.
New York’s main contract, light sweet crude for December delivery, slumped US$1.08 to US$63.07 a barrel.
Brent North Sea crude for December delivery fell US$0.95 to US$61.10 a barrel.
OPEC, in a bid to shore up falling prices, announced on Friday its output would be reduced by 1.5 million barrels per day to 27.3 million barrels starting next month.
“OPEC is obviously aware of the problems facing the global economy,” said David Moore, a Sydney-based commodity strategist with the Commonwealth Bank of Australia.
“They were responding to weaker oil consumption ... It was quite a decisive move by OPEC on Friday,” he said.
OPEC’s No. 2 producer, Iran, said on Sunday the cartel was likely to cut back further on production if the latest reduction did not stabilize prices.
“Be assured that if [Friday’s] decision is not effective on the market, OPEC will take steps to consolidate the market and stabilize prices at its next meeting,” Iranian representative Mohammad Ali Khatibi said in an interview on state television.
OPEC said its decision on Friday to slash output would be reviewed at the cartel’s next meeting in Oran, Algeria, on Dec. 17.
Many analysts have questioned the effectiveness of measures taken by OPEC, given the seriousness of the global financial crisis that has sharply reduced the prospects for economic growth and thus oil consumption.
Humphrey Harrison, managing director of energy consultants Horizon Strategies said the market can expect more OPEC meetings on output policy over the next few months.
“We’re in wholly unchartered territory right now” regarding the financial crisis, Harrison said.
“We’re probably going to see many OPEC meetings for a while,” the oil analyst said.
OPEC said in its statement on Friday published alongside its output decision that “the financial crisis is already having a noticeable impact on the world economy, dampening the demand for energy, in general, and oil in particular.”
“Moreover, forecasts indicate that the fall in demand will deepen, despite the approach of winter in the northern hemisphere,” the cartel said.
OPEC produces about 40 percent of the world’s crude.
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