Oil tumbles despite record OPEC cut
ORAN, Algeria — Here's how bad things are for OPEC these days: It announced its largest-ever production cut yesterday and oil prices promptly slumped to $40 a barrel, the lowest level in more than four years.
Ministers of the 13-nation oil cartel were trying to boost prices by slashing output 2.2 million barrels a day, more than double two recent production cuts. "I hope we surprised you," said OPEC President Chakib Khelil when asked whether the move would send prices upward.
Instead the markets yawned and there appeared to be more good news for consumers — at least for the short term. Although declining gasoline prices have begun to edge up after falling from an average of $4.11 a gallon in July to a low of $1.65 on Friday, analysts believe oil's decline could send them even lower.
Crude prices tumbled to $39.88 per barrel yesterday, levels not seen since July 2004 on the New York Mercantile Exchange. In just five months, crude has given up all the price gains made over the past four years amid an oil glut and the spreading recession.
Gasoline prices have been plunging right behind crude, providing a bit of economic cover for almost everyone. Yet crude has fallen so far, so fast, there is growing alarm that consumers are being set up for a price shock.