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NEW YORK: Oil prices fell sharply on Monday after OPEC decided at a weekend meeting against cutting production despite a deepening global economic slowdown.
Light sweet crude for delivery in January closed at 49.28 dollars a barrel on the New York Mercantile Exchange, down a whopping 5.15 dollars from Friday's close.
It hit an intraday low of 49.02 dollars.
In London, Brent North Sea crude for January skidded 5.52 dollars to settle at 47.97 dollars on the InterContinental Exchange.
Prices had climbed last week in anticipation of a meeting on Saturday of the Organisation of the Petroleum Exporting Countries. Some analysts had expected the 13-member cartel to further reduce production to offset a steep decline in prices from record peaks above 147 dollars in July.
"The major motivation for sellers is the discounting of the OPEC decision. But motivation is not hard to find. The elements propelling prices from 2003 on have largely dissipated," said Mike Fitzpatrick, analyst at MF Global.
"OPEC, like everyone else, certainly miscalculated the rapidity of the shift. Demand is no longer surging, but, instead, seriously contracting."
The cartel's secretary general Abdalla Salem El-Badri said on Monday that OPEC would decide on a "major" output cut if the oil market is deemed to be deteriorating.
"If we see the market is deteriorating we will make a major action in Algeria and anywhere if necessary," he told reporters in Iran.
OPEC is scheduled to meet in Oran, Algeria, on December 17.
El-Badri, who was attending an oil and gas seminar in Tehran, said earlier that OPEC would cut production by a "good amount" when it meets in December to tackle tumbling prices.
"We can't say how much the output cut will be in December but for sure there will be an action because we're seeing that stocks are high," he said. "I cannot tell you (the size of the cut) but it will be a good amount."
OPEC, which pumps 40 percent of the world's crude, met in Cairo on Saturday to assess the state of the oil market. Energy ministers decided that any output move would be made at their next meeting.
OPEC has already slashed output twice this year by a total of two million barrels per day (bpd) in response to plunging prices but fears remain that a global recession could ravage demand for energy.
Meanwhile the production cuts agreed in September and October failed to stop prices sliding under 50 dollars a barrel earlier this month as concern mounted about a global recession that has already affected the US, Japan and the eurozone.
"OPEC's failure to cut production, and even more importantly show a united front, seems to suggest that they are powerless to do anything to stop the drop in oil prices," said Phil Flynn at Alaron Trading. - AFP/de
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