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World economy

Oil prices down by half, despite Opec production cut

Article published on the 2008-10-24 Latest update 2008-10-24 12:18 TU

Opec seeks to stem plummeting oil prices by limiting supply.(Photo : AFP)

Opec seeks to stem plummeting oil prices by limiting supply.
(Photo : AFP)

World oil prices have fallen to their lowest levels for more than 17 months, dropping to 61 dollars per barrel despite an announcement Friday by Opec, the cartel of oil-producing countries, that it would cut production output by 1.5 million barrels per day.

Opec decided to cut its oil output starting 1 November at an emergency meeting in Vienna on Friday morning. The measure is intended to support plunging oil prices by restricting supply.

The cartel’s president, Chakib Khelil, said he wanted to minimise the effect the cuts would have on the already-battered world economy. The announcement was a compromise between Iran, which had been pushing for a reduction of two million barrels, and Venezuela, which pushed for a one million barrel cut.

Crude prices were soaring until recently, reaching their historic high of 147 dollars in July after more than doubling in a year. Fears of an impending worldwide recession brought on by the financial crisis have halted the crude price rises, and sent them spiralling downwards – losing almost 60 per cent in three months.

Opec, which includes Middle Eastern countries such as Saudi Arabia, Iran, Iraq, Kuweit and Libya as well as Venezuela, Nigeria, Angola and Ecuador, produces 40 per cent of the world’s oil.

The official quota is currently 28.8 million barrels per day.