MercoPress. South Atlantic News Agency

Oil hovers near $40 despite record OPEC cut

U.S. crude hovered near $40 a barrel on Thursday, around its lowest price since July 2004, amid doubts in OPEC's ability to curb output quickly after the group announced record production cuts.

Oil is $107 off its July peak, shedding value as the onset of a global recession cuts into fuel demand. Top forecasters now predict the first decline in world energy use since 1983. "The verdict was a resounding vote of no-confidence in the (OPEC) cartel's ability to curtail production given its previous tendencies to backslide on commitments," said Edward Meir of MF Global in a research note. U.S. light crude for January delivery tumbled nearly 8 percent on Wednesday as traders dismissed OPEC's 2.2 million barrel per day (bpd) output cut, decided in Algeria. The contract touched $39.19 on Thursday, its lowest price since July 2004, and was trading up 24 cents at $40.30 a barrel by 5:02 a.m. EST. London Brent crude for February rose 38 cents to $45.91. The cut announced by the Organization of the Petroleum Exporting Countries on Wednesday is its third since September. For those curbs to be effective the fractious group will need to enforce compliance, historically a tricky task in a falling market. OPEC itself estimates November production cut compliance by its members at around 50 percent. Next year's outlook is increasingly bleak as economic indicators show a deep global recession taking hold, causing oil demand to fall from the United States to China. JPMorgan cut its 2009 average crude oil price forecast to $43 a barrel from $69 following OPEC's cut, and analysts say more losses are in store until a sufficient supply is taken off the market or demand levels swing back up.(Reuters)