The OPEC cartel on Friday decided to slash oil production by 1.5 million barrels a day as of next month in an attempt to stem plunging prices for crude.
The size of the cut reflected concerns within the Organization of Petroleum Exporting Countries that the bottom appears to be falling out of the market. Crude is selling for 50 percent less than this year's historic heights because the worldwide economic crisis has put a huge crimp in demand.
But prices sagged, suggesting that the market was more concerned with the economic turmoil reaching into all corners of the globe than crude availability. If economies in the U.S. and other leading crude consumers continue to deteriorate, industries will use less oil, making it a buyer's market.
Despite the OPEC cut, benchmark crude futures fell $3.99 to $63.85 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract overnight rose $1.09 to settle at $67.84.
The language of an OPEC statement announcing the decision also reflected how seriously the producers' cartel viewed the erosion of its revenues, as did the unusually short deliberations leading to the decision.
"Oil prices have witnessed a dramatic collapse — unprecedented in speed and magnitude," said a statement from the 13-nation organization. "This slowdown in demand is serving to exacerbate the situation in a market which has been oversupplied with crude for some time."
The cut announced is already sizable. But because OPEC nations continue to overproduce by about 300,000 barrels a day from the official quota of close to 29 million barrels the total amount that the 13-nation group wants to take off the market is even higher — around 1.8 million barrels a day.
And OPEC officials left no doubt that they were ready to slice deeper quickly if Friday's decision does not end the price freefall.
Friday's meeting was called unexpectedly in response to prices that have disintegrated since their historic high of nearly $150 in July. And OPEC President Chakib Khelil said OPEC was ready to convene another emergency session before its next planned gathering in December in Algeria "if there are further decisions that have to be made" on slashing prices.