VIENNA — When oil prices go down, OPEC slashes production and the price of crude rises, right? Maybe not this time. With the global economy edging toward recession, the specter of diminishing supply has been blown away by a stunning lack of demand that has the market in a stranglehold.
Ahead of Friday’s emergency meeting of the Organization of the Petroleum Exporting Countries, the question is not whether the 13-nation group will cut production, but by how many millions of barrels. Spooked by prices that have slid more than 50 percent from a record high of more than $147 a barrel in July, OPEC is on the defensive.
Chakib Khelil, Algeria’s oil minister and OPEC’s president, speaks of a “significant” reduction from the present daily output of around 29 million barrels, and expectations are that the group could pare up to 2 million barrels from that figure.
Oil tumbled below $67 a barrel to 16-month lows Wednesday after the U.S. government said gasoline inventories rose by 2.7 million barrels last week, and inventories of distillates, which include heating oil and diesel, rose by 2.2 million barrels.
Over the last four weeks, the Energy Information Administration said, motor gasoline demand was down 4.3 percent from the same period last year. Distillate fuel demand was down 5.8 percent, and jet-fuel demand was down 9.2 percent.
A gallon of gas is 30 percent cheaper today than it was when prices peaked last summer. On July 11, a gallon of regular averaged $4.11.
On Wednesday, it was $2.86. A year ago, it was $2.82.
In Denver, the average price for a gallon of regular unleaded was $2.84, according to AAA, the Oil Price Information Service and Wright Express.
OPEC production cuts of the magnitude being discussed have in the past led to significant crude price hikes.
But while prices will likely blip upward at least briefly, there are signs that a significant upward trend may be short-lived, with fear growing that the worst is yet to come for the global economy.
