Opec agrees to record production cut, oil prices slip slightly

Opec agrees record oil output cut (BBC)
The oil producers' cartel Opec has agreed to make a record cut in output, slashing 2.2 million barrels per day (bpd) from its current supply.
Opec has made two other cuts since September, meaning it has cut a total of 4.2 million bpd in four months.
US light, sweet crude for January fell as low as $39.94 a barrel, its first time been below $40 since July 2004.
The falls were blamed on US inventories figures, which showed that demand for petrol in the four weeks to 12 December was down 2.7% from the same period last year.
The price later recovered slightly to trade on the New York Mercantile Exchange at $40.31, which was down $3.29 from Tuesday's close.

The OPEC also seems to be worried about the Economic Downturn

Press Release
The 151st (Extraordinary) Meeting of the Conference of the Organization of the Petroleum Exporting Countries (OPEC) convened in Oran, Algeria, on 17 December 2008, under the Chairmanship of its President, HE Dr Chakib Khelil, Minister of Energy and Mines of Algeria and Head of its Delegation, and its Alternate President, HE Eng José Maria Botelho de Vasconcelos, Minister of Petroleum of Angola and Head of its Delegation.

Having reviewed the oil market outlook, including overall demand/supply projections for the year 2009, in particular the first and second quarters, the Conference observed that crude volumes entering the market remain well in excess of actual demand: this is clearly demonstrated by the fact that crude stocks in OECD countries are well above their five-year average and are expected to continue to rise.
Moreover, the impact of the grave global economic downturn has led to a destruction of demand, resulting in unprecedented downward pressure being exerted on prices, which have fallen by more than US $90 a barrel since early July 2008. Indeed, the Conference noted that, if unchecked, prices could fall to levels which would place at jeopardy the investments required to guarantee adequate energy supplies in the medium-to-long term.

In light of the above, the Conference agreed to cut 4.2 million barrels a day from the actual September 2008 OPEC-11 production of 29.045 mb/d, with effect from 1 January 2009, with Member Countries strongly emphasizing their firm commitment to ensuring that their production is reduced by the individually agreed amounts.

In taking the above decision, Heads of Delegation reiterated the Organization’s firm commitment to providing an economic and regular supply of petroleum to consuming nations, as well as to stabilizing the market and realizing OPEC’s objective of maintaining crude oil prices at fair and equitable levels, for the future well-being of the market and the good of producers and consumers alike. With this in mind, the Conference renewed its call on non-OPEC producers/exporters to cooperate with the Organization to support oil market stabilization.