Business | Oil & Gas

Oil slides below $51 after Opec delays another cut

Group's Gulf producers want to see strict compliance with existing output curbs before agreeing to any more reductions.

  • Reuters
  • Published: 17:51 December 1, 2008
  • Gulf News

London : Oil fell more than $3 to below $51 (Dh187) a barrel on MOnday after Opec decided to wait until mid-December to make a further cut in output to try to defend sagging prices.

U.S. light crude for January delivery was down $3.70 at $50.73 a barrel by 1504 GMT.

Oil had settled at $54.43 on Friday after a shortened post-Thanksgiving holiday session. On Nov-ember 21 it touched a three and half year low of $48.25.

London Brent crude was $3.55 lower at $49.94 a barrel.

"The markets are discounting Opec's decision to stand pat by selling off," said Edward Meir, analyst at broker MF Global.

"When it comes to calibrating supply and demand to fit the new post-September economic realities, Opec seems to be in a state of denial," he said in a research note.

Oil is down by almost two-thirds from a peak of more than $147 a barrel in July. Prices fell almost 20 per cent in November and 32 per cent in October, their biggest monthly fall ever, despite Opec's around 2 million barrels per day cutbacks.

A global economic slowdown that has tipped a growing number of countries into recession has caused sharp falls in oil demand. US shares fell steeply yesterday, illustrating the depth of investor concern over the economic downturn.

But Opec's Gulf producers want to see strict compliance with the producer group's existing output curbs of 2 million barrels per day (bpd) before agreeing to any more.

"I was a little surprised they didn't announce anything stronger," said Simon Wardell, senior oil analyst at IHS Global Insight. "I think this (meeting) was to underline that everyone really needs to work together."

In Cairo, Opec ministers discussed how much more they needed to cut. Most, including Gulf producers led by Saudi Arabia, saw the need to trim another 1 to 1.5 million bpd.

The Organisation of Petroleum Exporting Countries meets next in Algeria on December 17.

Saudi Arabia on Saturday pointed to $75 a barrel as a "fair price" for oil.

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