Oil plummeted by more than 9% in a single day's trading, on Monday, as a direct consequence of the Organisation of Petroleum Exporting Countries (OPEC) decision to delay any further output cuts, at its Cairo summit over the weekend.
New York primary contract, light, sweet crude for January delivery settled at $49.28 a barrel, the lowest close on the NYMEX since back in May 2005.
In tandem London's Brent crude fell by $5.52, to $47.97 a barrel.
Spiralling demand from emerging economies helped send oil on a formidable six-year-long rally. But, prices have now tumbled by some 67% since reaching their record high on July 11 as a result of falling demand in the world's more established consumer economies, among them the U.S.
Quite simply Monday was an astonishing day's trading in what was the latest chapter in oil's rollercoaster tale of prices in 2008.
The twelve-nation-strong cartel delayed a decision to curtail output – in an attempt to arrest falling prices – until its scheduled meeting in Algeria, on December 17.
The organisation's Secretary General, Abdalla el-Badri, said that they needed time to gauge the full impact of the 1.5 million barrel per day (bpd) cut made in October – which has yet to have its desired effect.
To date, the group has agreed to trim 2 million bpd, in total, from production since September.
El-Badri was quick to confirm that actions will however be taken by the group at its next meeting in Oran. "The market is oversupplied," he definitively stated.
Questions over the effectiveness of implementation of the organisation's last cut have been publicly aired. This week Saudi Arabia, OPEC's most dominant member-nation, demanded full compliance with present quotas by all members.
Abdullah al-Attiyah, the Qatari Oil Minister, said: "We are very concerned about over-production."
In support Mohammad al-Olaim, the Kuwati Oil Minster, added: "Market conditions require us to be 100 per cent compliant."
For some member nations, hopeful of quota cuts being introduced over the weekend, this month's meeting can surely not come soon enough.
Michael Fitzpatrick, Vice President for energy risk management at MF Global, in New York, said: "OPEC's postponement of a decision on output combined with the fact there's nothing out there to cheer from about the economy is sending prices lower." If Fitzpatrick's analytical skills are correct, oil traders will be bracing themselves for what lies ahead over the coming fortnight in the run up to the next scheduled meeting.
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