OPEC cuts fail to have significant impact on oil prices

25-Feb-09

Monday morning saw light, sweet crude for April delivery dip to US$38.44 a barrel on the NYMEX as news that OPEC had slashed production by over 4 mln bpd was overhauled by news from the equity markets of falling stock prices. Brent crude dipped to US$40.99 in London. Total February output for OPEC nations is expected to average 25.3 mln bpd, down 4.3 mln bpd from September. Last week's EIA report indicating an unexpected fall in US crude inventories from a 20-month high, is a signal the OPEC cuts are starting to stabilize the market. But demand still continues to be poor as the global economy struggles to find a way out of the meltdown. Economists warn a sharp rise in oil prices could worsen the global downturn, as consumers and businesses could tend to cut back spending further. Gloomy demand forecast, unlikely to recover in the short term, continues to exert downward pressure on oil.