Oil prices slide despite production-cut plans

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Ali I Naimi, Saudi Arabia Minister of Petroleum and Mineral Resources, speaks during the "London Energy Meeting" in London, Friday Dec. 19, 2008.(AP Photo/Oli Scarff, pool)AP

WASHINGTON — Oil prices continued their slide Friday as worries about the global economic slump trumped recent efforts by oil-producing nations to prop up prices with massive production cuts. Analysts said prices may even dip below $30 a barrel before reversing course.

The price of a barrel of light sweet crude for January delivery was down at $33.87 on the New York Mercantile Exchange, down more than 6 percent. The January contract expired Friday. The price of a barrel of crude for delivery in February rose 1.7 percent, to $42.36.

Traders shrugged off the decision Wednesday by the Organization of Petroleum Exporting Countries (OPEC) to cut production by 2.2 million barrels a day. OPEC might scale back production further. Appearing at the London Energy Meeting, a gathering of oil-producing and oil-consuming nations, OPEC President Chakib Khelil said the group might meet in Kuwait City on Jan. 19 to discuss more cuts.

"We don't see the bottom yet for the demand," he told reporters at the meeting. "We will keep lowering supply until we meet the equilibrium."

When oil prices will stop falling is not clear. The most recent short-term energy outlook by the Energy Information Administration (EIA), an arm of the Energy Department, doesn't forecast an uptick in demand until April at the earliest, when driving season in the United States begins. Even then, it forecasts prices remaining largely flat for the year.

The production cuts by OPEC are "going to be overwhelmed by the economic slowdown," said EIA economist Neil Gamson.

The drop in oil prices has led to the delay or cancellation of orders for new oil rigs, one major oil services company said. Oil refiners also have cut back production of gasoline.

For U.S. consumers, who have seen the value of their homes and retirement savings dwindle and mass layoffs become commonplace, the continued drop in crude oil prices is "music to our ears," said John Townsend, a AAA spokesman. On Friday, the average price for a gallon of gasoline nationwide was $1.67, compared with $2.05 a month ago.

Consumers "love these prices," he said. "They're delighted."

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