MercoPress. South Atlantic News Agency

Oil markets more focused on mounting reserves than OPEC

OPEC announced Wednesday an unprecedented production cut of 2.2 million barrels a day in an effort to shore up the price of crude. It's the biggest production cut in the history of the Organization of Petroleum Exporting Countries which pumps more than a third of the world's daily crude supply.

However markets seemed to be more focused on increasing US energy reserves than in the OPEC ministers meeting in Oran, Algeria because the price of New York oil sank to its lowest point in four and a half years. In afternoon trade on the New York Mercantile Exchange (NYMEX), light sweet crude for delivery in January plunged as low as 40.20 US dollars a barrel, the lowest level since July 2004. In later trade, London Brent oil stood at 46.64 per barrel, down one cent from Tuesday's close. New York crude was 2.08 lower at 41.50 USD. The latest announced cut takes effect from January. Since late northern summer, OPEC has announced three production cuts, including today's, totaling 4.2 million bpd. Those three cuts have been the steepest reductions in the cartel's history, but the group has struggled to convince markets that members are effectively rolling back their output to their agreed levels. The largest production reduction so far had been in 1999 with a 1.7 million bpd cut. OPEC credibility has taken a beating with oil markets as some members have jealously guarded their oil revenues and market share. The new cut - if fully implemented - will cut even deeper into OPEC member country revenues amid the tumble in crude prices. Oil prices have continued falling despite two agreements in September and October to reduce production by a combined 1.7 million bpd. "There's a consensus in OPEC as to the considerable reduction in production to stabilize prices", said the organization's president Chakib Khelil from Algeria. Previous to the OPEC announcement the Russian Energy Deputy Minister Igor Sechinsu said Moscow was willing to cut production by 320.000 bpd. He also announced Russia would request becoming a full observer at OPEC. It was also informed that OPEC and the Russian Energy ministry agreed to create a joint standing work group.