MercoPress. South Atlantic News Agency

Oil price collapses in spite of promises of further supply cuts

OPEC will continue to cut crude production until prices stabilize said the cartel's president Chakib Jelil on Friday during a conference of oil producing and consuming countries in London.

"We will continue reducing supply until prices stabilize", Jelil told reporters during a break at the 27 countries meeting convened by British PM Gordon Brown. But he also admitted he believed oil prices had found a floor around current levels: "I don't believe there is any reason for it to fall any further. I don't see it going lower". The Organization of Petroleum Exporting Countries decided last Tuesday to cut production by 2.2 million barrels, the third reduction in four months and the largest since 1982, with the purpose of helping sustain the sliding prices However oil fell over 6% on Friday, as fears of economic slowdown and growing stocks weighed heavier than the production cuts which become effective next January first. US light crude for January delivery settled down 2.35 at 33.87 US dollars a barrel, the lowest since February 10, 2004, when it ended at the same level. But the more active February contract settled up 69 cents at 42.36 USD a barrel with cuts in OPEC production expected to take hold in that month. London Brent crude meanwhile gained 64 cents, settling at 44 USD. Friday marked the sixth consecutive day of falls in oil, off more than 29% from the 47.98 USD seen when prices last rose on December 11. British industry forecasters predict that global oil demand will contract for the first time since 1983. "Our recent economic history has the scars of our failure in overcoming relations traditionally adverse between oil producers and consumers", said PM Brown during the conference. Saudi Arabia's Oil minister Alí al Naimi said that sustaining prices was crucial to ensure investments for future supplies and to stabilize prices and the market. He said a "fair and reasonable" price should average 75 US dollars a barrel. The conference originally was planned as a meeting of heads of state but the UK government stepped back to avoid controversy over the presence of Iran's president Mahmud Ahmadinejad and Venezuela's Hugo Chavez. In spite of OPEC's pledge to cut an additional 2.2 million bpd of production totaling 4 million bpd equivalent to 5% of world supply, many traders doubt the cartel will fully implement the agreed cuts. Ali al-Naimi said Saudi Arabia would be pumping less oil in January and would be at its new output target in line with the group's latest cut.