NEW YORK – Oil on Friday fell more than 2 percent to a 2006 low below $57 a barrel on speculation that OPEC members would not follow through on plans to make deep production cuts to stem a three-month price slide.
U.S. crude for November delivery settled $1.68 lower at $56.82 a barrel, the lowest this year after trading as low as $56.55 in intraday activity. U.S. oil prices have dropped from July records of $78.40 a barrel on healthy inventories.
London Brent crude fell $1.19 to $59.68 a barrel.
OPEC ministers agreed early Friday to reduce output by 1.2 million barrels per day (bpd), 200,000 bpd more than expected. But some analysts expressed doubts about whether the cartel will reach the targeted reductions.
"This cut should result in about a half million barrels per day of production actually getting taken out of the market," said Jim Ritterbusch, president at Ritterbusch and Associates in Galena, Illinois.
Some OPEC ministers said a further cut of 500,000 bpd could follow when the cartel next meets in Nigeria in December. They said they were concerned about high fuel stocks in consumer countries, particularly in the United States, and a projected drop in demand for OPEC oil in 2007 as competitors bring more supplies online.
The producer group, which supplies about a third of the world's crude, said in a statement after an emergency meeting in Doha that oversupply had destabilized the oil market.
The cut was its deepest since January 2002 and is equal to about 4.3 percent of September supply.
"It was a surprise. It shows the determination of OPEC," said Tetsu Emori, chief strategist at Mitsui Bussan Futures Ltd. in Tokyo. "They obviously wanted to send a message to the market."
"This is not the end of the road because we have another meeting coming up," Saudi Arabia's Oil Minister Ali Al-Naimi told Reuters.
Naimi said that Saudi Arabia fully backed the OPEC cut and had already notified customers of lower supply. The world's top exporter will shoulder around 32 percent of the cut, amounting to 380,000 bpd.
Ministers' failure to speak with one voice before the hastily arranged talks had deepened oil's losses of around 25 percent from a mid-July peak of $78.40 a barrel.
To sidestep the issue of quotas and market share that analysts said had begun to cost the cartel credibility, OPEC published only a list of individual cutbacks but left formal quotas unchanged.
OPEC's cut also signaled that it would defend a price of about $60 a barrel, high enough to justify its investment in future production capacity but low enough to allow economic growth and deter a flood of alternative fuels.
"The drop in prices that has already occurred has had a remarkably positive influence on consumer attitudes and spending in the U.S," said Adam Sieminksi of Deutsche Bank.
"The shopping season is coming up and it's going to be a lot better with oil at $60 than at $80."
The producer curbs will begin to bite just as the northern hemisphere heads into winter, when oil demand surges.
Private weather forecaster AccuWeather said this week that the U.S. East Coast should be chillier than normal this year.