New York oil price slumps below $34 a barrel
2008-12-19

Category OPEC Nations Algeria Category Regions Regions Europe Africa People Gordon Brown Event 2008 Global Oil Crisis Source (AFP)

LONDON (AFP) - The price of New York oil sank under 34 dollars per barrel on Friday for the first time for more than four and a half years, as weak global demand overshadowed a record OPEC output cut, traders said.

The fresh falls prompted OPEC President Chakib Khelil to stress that the cartel would continue cutting output until prices stabilise.

New York's light sweet crude for delivery in January dived as low as 33.44 dollars a barrel, which was the lowest point since April 2, 2004.

The January contract, which was also driven lower due to its expiry on Friday, later pulled back to 36.91, up 69 cents from the close on Thursday.

New York crude for February delivery, which becomes the main contract on Monday, stood at 43.13, up 1.46 dollars.

The price of New York oil has now plunged by as much as 77 percent since striking a record high above 147 dollars in July as the market was rocked by concerns that a looming worldwide recession will slash energy demand.

London's Brent North Sea oil for February delivery rose 1.31 dollars to 44.67 dollars a barrel on Friday, after earlier dipping as low as 43.03.

"Crude fell as concerns over a global economic slowdown weighed on sentiment," said Sucden analyst Nimit Khamar.

The Organization of the Petroleum Exporting Countries (OPEC), which produces about 40 percent of the world's crude, agreed Wednesday to cut output by 2.2 million barrels a day in a bid to shore up the market and protect its members' revenues.

"We will continue this reduction until the price will stabilise," Khelil told reporters in London on Friday at a key gathering of major oil producing and consuming nations.

Khelil, who is also Algeria's energy minister, said prices could have gone even lower if OPEC had not already made cuts in September and October.

"I think the question that people don't ask is where would the price be today if we did not take a decision in September of reducing 500,000 (bpd), and if we did not make the decision in October to reduce by 1.5 (million bpd)," he said.

"The prices today would have been very very low, so I think we did have an impact although we did not succeed in stabilising," he added.

The OPEC's output reduction, agreed this week at a ministerial meeting in Oran, Algeria, has failed to prevent oil diving to multi-year lows on stubborn demand fears.

"The global recession continues to sap demand," said BetOnMarkets analyst David Evans.

"Even after OPEC cut production by more then two million barrels, oil prices have fallen below the 40 dollar per barrel level. Prices are likely to stabilise between the 35 and 40 dollar levels."

The market plunged also lower as many traders questioned whether all members of the 13-nation OPEC cartel would fully enforce the reduction.

"Scepticism about OPEC's ability to cut output resulted in a steep fall in oil prices," said analysts at Barclays Capital.

In London, British Prime Minister Gordon Brown said that oil price volatility was "in no-one's interest."

Saudi Arabian oil minister Ali al-Nuaimi again indicated he thought 75 dollars per barrel would be "fair and reasonable," adding that anything lower could lead to more, not less, instability.

"When oil is priced lower, such as it is now, there will be less investment and less future supply," he said in London.

"Eventually, this scenario is followed by a surge in prices, as supplies will not be sufficient to meet growth in consumption levels."