OPEC Secretary General Abdalla el-Badri's announced that the cartel would postpone 35 of its 150 new oil and gas projects. He also said the group was likely fall short of its goal to raise production capacity by five million barrels per day by 2012 and that they are close to completing its previously announced cut of 4.2 million barrels per day.
Light, sweet crude for March delivery fell 61 cents to settle at $39.56 a barrel on the New York Mercantile Exchange as crude (oil) producers continue to be hard hit by falling prices, but industry experts warn that taking production projects off line is short-term thinking.
"They're only hurting themselves," said Phil Flynn, an analyst at Alaron Trading Corp. "Any spike in crude prices because of production declines from the Organization of Petroleum Exporting Countries will make it harder for economies to recover and for demand to pick up naturally, and when demand picks up, they won't have the production capacity to meet it."
Oil traders and brokers have come to terms with the new state of the oil industry after a frenetic 2008 in which prices spiked above $147 a barrel, then crashed to close at $30.
"They have digested the massive jobless numbers from the government, the rounds of corporate retrenchment, and the bloated crude inventory numbers. In the past week, traders have come to a rough consensus of what a barrel of crude is worth. We've reached an equilibrium point," industry analyst Peter Beutel said. "They're willing to trade below $40, but by the end of the day, there's always enough bidding to push it back above that level."
OPEC currently produces about 40 per cent of the world's crude oil.