OPEC, which supplies more than 40 percent of the world’s oil, agreed Wednesday to cut production quotas by a larger- than-expected 9 percent to revive prices as a global recession reduces demand for crude.
The Organization of the Petroleum Exporting Countries set a quota for 11 of its members of 24.845 million barrels a day, starting Jan. 1, compared with its current target of 27.308 million barrels a day, OPEC president Chakib Khelil said.
The record 2.46 million-barrel-a-day cut is larger than the 2 million-barrel drop indicated Tuesday by Saudi Arabian Oil Minister Ali al-Naimi.
“OPEC is sending a message that they are trying to cut pretty seriously,” said Mike Wittner, head of oil research at Societe Generale SA in London. “If they need more cuts, there will be more cuts.”
Crude oil fell as low as $39.88 a barrel in New York, the lowest since July 2004, on skepticism over whether OPEC will adhere to its new agreement and after a government report showed rising U.S. crude stockpiles. Light, sweet crude for January delivery settled at $40.06 on the New York Mercantile Exchange.
Oil’s more than $100-a-barrel collapse from July’s record has curbed revenue for producers, threatening government budget shortfalls. Saudi Arabia’s King Abdullah said last month that producers need crude at $75 to spur investment in new fields.
Russia, the biggest oil exporter outside of OPEC, pledged Wednesday to curb exports too, as it did a decade ago when oil sank toward $10 a barrel.
