Business | Oil & Gas
Opec cut fails to halt slide
Leading oil producing nations on Friday agreed to cut their crude output by 1.5 million barrels per day. But the move failed to stem the ongoing oil price slide, in a sign the markets see lower fuel demand amid a weakening global economy.
- Gulf News Report
- Published: 00:08 October 25, 2008
- US light crude for December delivery touched $62.65 at one point, its lowest since May 2007.
- Image Credit: Gulf News Archive
Dubai: Leading oil producing nations on Friday agreed to cut their crude output by 1.5 million barrels per day. But the move failed to stem the ongoing oil price slide, in a sign the markets see lower fuel demand amid a weakening global economy.
Oil dropped more than $5 a barrel as gloom about a global economic downturn took the steam out of the Opec agreement, which came at an emergency meeting of the 12-member group's ministers in Vienna. The output reduction represents about 5 per cent of Opec's supply.
US light crude for December delivery touched $62.65 at one point, its lowest since May 2007.
Saudi Arabian Oil Minister Ali Al Naimi said the group had agreed the output cut with effect from November 1. Traders said Opec's action might not be enough to arrest a slide that has seen oil down more than 50 per cent from a record $147-plus a barrel in July.
"I think what we have done today, the market was already prepared for. I think it was priced in," Kuwaiti Oil Minister Mohammad Al Olaim said.
The US, Britain and the International Energy Agency, which advises industrialised consumer countries, were critical of Opec's decision. Investors across financial markets are pessimistic about the world economy, illustrated by sharp falls in US, European and Asian stocks on Friday, led by a 10 per cent drop in Japan's Nikkei average and about 11 per cent fall in India's Sensex.
US stocks plummeted at the open, continuing a global collapse in equities brought on by intense fear of worldwide recession.
World stocks, measured by MSCI's all-country world index, fell 6.26 per cent to hit five-year lows during the session.
Even gold, a traditional safe haven, fell nearly five per cent at one stage, pressured by a surge in the US dollar as investors moved into cash.
Thousands of people jammed jewellery shops in the UAE as they rushed to buy gold with prices plummeting to as low as Dh80 for a gram of 22 carat gold.
A combination of lower oil prices and the upcoming Diwali festivities had played a vital role to push gold prices down by 20 per cent, a major gold jewellery dealer said.
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