OPEC decision can't halt oil's slide

Crude drops to 17-month low as world economy curbs demand for petroleum

Traders work the oil pit at the New York Mercantile Exchange. Crude oil dropped 5.4 percent to $64.15 a barrel yesterday. (Jin Lee/Associated Press)

NEW YORK - Crude oil tumbled to a 17-month low as OPEC's decision to slash production by 1.5 million barrels a day failed to ease concern that the global economic slump is curbing demand.

"At this stage, it looks like we are at the edge of a bottomless pit and prices are heading quickly toward $50," said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. "OPEC really needed to take the bull by the horns and make a bigger cut."

The 13 members of the Organization of Petroleum Exporting Countries agreed to lower supply starting in November, oil ministers said yesterday in Vienna. Prices have dropped 56 percent from the record $147.27 a barrel reached on July 11 as stock markets declined.

Crude oil for December delivery fell $3.69, or 5.4 percent, to settle at $64.15 a barrel on the New York Mercantile Exchange, the lowest since May 31, 2007. Futures are off 26 percent from a year ago. The December contract fell 11 percent this week, the fourth straight weekly decline.

Gasoline for November delivery fell 9.9 cents, or 6.3 percent, to settle at $1.48 a gallon, the lowest since Jan. 29, 2007.

"Right now equities and the credit markets are more important than OPEC," said Rachel Ziemba, an analyst at RGE Monitor, an economic research company in New York. "OPEC won't be able to support the oil market until other markets find a bottom and begin to recover."

OPEC's president, Algerian Oil Minister Chakib Khelil, said at a news conference the cut will be "100 percent effective" in stabilizing prices.

OPEC's reduction will be from the existing quota for 11 members of 28.8 million barrels a day. Saudi Arabia, the group's largest producer, will curb its output target by 466,000 barrels a day. Iran, the second-biggest, will cut 199,000 barrels.

"I don't like the cut in production," UK Prime Minister Gordon Brown said from his home in Scotland. "The important thing that has happened over the last few weeks, since we called for it, is that the oil price has come down by half. That needs to be passed on to the consumer."

The Bush administration also criticized the OPEC decision, calling the move anticompetitive.

OPEC will continue to watch prices and will meet as often as needed to ensure stability, Saudi Arabian Oil Minister Ali al-Naimi said after the meeting of less than two hours. "We don't know what's going to happen in December," he said, referring to OPEC's next scheduled meeting in Algeria on Dec. 17.

Global oil demand might decline for the first time in 15 years in 2008 and stagnate next year, the Centre for Global Energy Studies said in a report on Monday. OPEC, the International Energy Agency, and US Energy Department cut their forecasts for growth this month.

Brent crude oil for December settlement declined $3.87, or 5.9 percent, to $62.05 a barrel on London's ICE Futures Europe exchange, the lowest settlement price since March 21, 2007.