Crude oil futures sank Monday despite expectations OPEC ministers could make their deepest oil supply cut ever when they meet here on Wednesday to combat shrinking demand, bulging stocks and a $100 collapse in prices. For many in the Organization of the Petroleum Exporting Countries, up to 2 million barrels per day (bpd) must be removed to keep up with a slump in consumption that has knocked two-thirds off prices since July. “We have to act -- we see a very sizable reduction,” OPEC Secretary-General Abdullah Al-Badri told reporters on his arrival here Monday. OPEC President Chakib Khelil agreed. “Everybody is supporting a cut – I don't have any doubt about it.” Khelil said Riyadh had already cut its supply by 8 percent and this had affected the market. Since early September, OPEC has said it would reduce supply by a total of 2 million bpd, but prices continued to slide until a rally late last week, though trading was still far from the “fair” price of $75 a barrel identified by Saudi Arabia at the end of November. Analysts say another 2 million bpd cut is needed from OPEC because demand will remain weak into 2009. On Monday, light, sweet crude for January on the New York Mercantile Exchange fell $1.77 to settle at $44.51 with more dour economic news from both Asia and the United States. Investors were looking at more signals of deteriorating demand, rather than at any OPEC action to cut supply, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. OPEC, which pumps more than a third of the world's oil, hopes to prove wrong the banks which foresee oil's descent to $30 or below in the first quarter of next year. Iran said it will propose a cut of between 1.5 million to 2 million bpd in Oran. Economists say Tehran needs an oil price near $80 to avoid a spending squeeze in next year's budget. Khelil estimated there was an oversupply of 400 million barrels currently in the oil market. Russia, the biggest non-OPEC exporter, is sending its energy minister and its deputy prime minister to the Oran meeting. The head of Russian oil company LUKOIL said he believed OPEC is expecting Russia to offer output cuts of up to 300,000 bpd. The United States predicts global oil demand will shrink this year and next – the first time since the 1980s consumption had contracted for two years running.
