MercoPress. South Atlantic News Agency

Oil price down in spite of OPEC's cut announcement

World crude prices fell again Wednesday with New York oil hitting its lowest level of the year in spite of OPEC's announcement that cartel members have agreed on cutting production by up to a million barrels per day.

New York's main contract, light sweet crude for delivery in November, lost 93 cents to close at 57.59 US dollars a barrel after having dropped to 57.48, its worst point since December 27.

Nigerian Oil Minister Edmund Daukoru, who currently heads the Organization of the Petroleum Exporting Countries, said the cartel's 11 nations had agreed to slash output by a combined million bpd from November.

"Our position to cut one million bpd has received consensus. All members have agreed," he said. But the OPEC secretariat in Vienna could not immediately confirm that an accord had been struck. And some analysts said Saudi Arabia had given conflicting messages.

Daukoru said in Lagos that OPEC members, whose agreed production ceiling is now 28 million bpd, could decide on the exact breakdown for the reduction later Wednesday. But earlier a source close to the OPEC chief, asking not to be named, had said the cartel would not convene an emergency meeting to endorse a production cut.

The oil market has been waiting more than two weeks for a clear signal from OPEC in reaction to a 25% plunge in crude prices from summer highs above 78 US dollars a barrel.

In Missouri, US Secretary of Energy Samuel Bodman said that he had yet to talk with Saudi Oil Minister and other OPEC ministers to let them know the Bush administration position regarding the announced cut in production of a million bpd.

"I will continue to insist that they make oil available to the market because we need it", said Bodman. However he admitted his Department will delay the purchase of crude to replenish the Oil Strategic Reserve until after winter.

"We'll probably delay the purchase until next year. We don't want to challenge the heating oil market", said Bodman.

In other market news, the International Energy Agency overnight shaved its forecast for growth of global oil demand this year and next.

The IEA said in its monthly report that a possible OPEC output cut, global instability and growth in China were likely to keep the market under tension, even though prices had fallen because of stock building and slowing demand.

The agency forecast an increase of 1.2% in global oil demand this year to 84.6 million bpd and a 1.7% rise in 2007 to 86.0 million. This was lower than its previous growth estimate of 1.3 per cent in 2006 and 1.8 per cent in 2007.