Oil prices closed at less than $47 a barrel on Tuesday as news that OPEC made only two-thirds of its pledged output cuts last month outweighed a rebound in the U.S. stock market. New York light sweet crude for January dropped $2.32 to close at $46.96, the first time the benchmark contract has settled below $47 since May 2005.
“The story about OPEC still not in full compliance with pledged output reductions is the reason why crude futures are down right now,” said Phil Flynn, an analyst at Alaron Trading in Chicago. “This lack of compliance is disappointing to the market and this puts into doubt OPEC’s indications that they will make more production cuts later this month.” Members of the OPEC had pledged to lower output by 1.5 million barrels per day for November, but were only 66 percent compliant with the target last month.
Oil prices have plummeted amid the global financial crisis from record highs hit on July 11: 147.27 dollars in New York contract and 147.50 dollars in London. “There is still a fear that the global economy is in deep trouble and the oil price is simply following that,” said Adam Sieminski, analyst at Deutsche Bank. Oil prices fell more than five dollars Monday after OPEC decided at a weekend meeting in Cairo against cutting production, preferring to wait until December before reducing crude exports.