"Be it in November or in December, be it formally or informally, Opec will need to reduce production not because the price is currently too low but because there is not enough demand"
Javier Blas & Carola Hoyos Financial Times Oct. 10, 2008
Oil prices plunged below $85 a barrel yesterday, the lowest level in a year, as Opec, the oil exporting countries' cartel, called an emergency meeting to discuss reducing its crude production to halt the collapse in prices.
The announcement came as crude oil futures in New York fell almost $5 to an intraday low of $84.19 a barrel, the lowest level since October 2007.
In late afternoon trading in New York, oil was down $4.14 to $84.81 a barrel.
The drop suggested that the market was firmly focused on the impact of the financial crisis on global economic growth and energy demand next year, rather than in the cartel's action.
The cartel, which controls 40 per cent of the world's oil output, said in an unusually frank statement that it was concerned about the "deteriorating economic conditions with contagion risks" and will meet in four weeks to tackle the problem.
Gold, seen as a safe haven in turbulent times, recovered earlier losses to trade at $913 an ounce, up $8 on the day.
Harry Tchilinguirian, an oil analyst at BNP Paribas in London, said the correction in oil prices had come to closely track movements in equity indices and, until such time that credit conditions normalise and confidence returns, "this is likely to continue".
He cut his price forecast for the first quarter to $81.30 a barrel, adding that prices would average in 2009 about $95 a barrel, well below the $115 a barrel he predicted just a month ago. Oil prices have fallen almost 43 per cent from July's all-time high of $147.27 a barrel.
The US Department of Energy reported this week that the country's oil demand averaged 18.66m barrels a day last week, down 8.6 per cent against the same period a year ago as the economic downturn takes its toll on oil consumption. High prices during the summer have forced US motorists to cut their mileage