Commodities: OPEC Slashes Oil Production

OPEC Continues Cutting Oil in Effort to Support Prices

In a dramatic emergency meeting meant to shore up the plunging price of oil, OPEC slashed oil production by 1.5 million, in the middle of the expected 1 million to 2 million barrels analysts were looking for.

Even though OPEC will cut production dramatically, crude prices responded by falling another 5 percent; evidently speaking to demand, which isn't going to change in the current economic crisis, which has consumers cutting back on any unnecessary spending or traveling.

OPEC is of course cautious in their approach, as some of the other oil-producing nations pressured them to cut production by at least 2 million barrels a day. The problem they face is if they cut it too much, and prices surge too high, consumers will cut back even more on expenses, and the plan would backfire.

All this has done for OPEC is offer the possibility of neutralizing or slowing down the fall; it won't make prices go up much higher ... if at all.

OPEC President Chakib Khelil confirmed this saying the intention of the production cuts was to limit the fall in oil prices, not an attempt to increase them.

Khelil was quick to add that even with the idea of consumers cutting back if prices go too high is part of their decision, they will cut production even more if crude prices drop to unsustainable levels.

On the New York Mercantile Exchange today, oil futures fell at one point to under $63 a barrel, while they were at $64.51 a barrel at around noon EST.

What it looks like OPEC is attempting to do is stop the price drop per barrel at about $60.

At this point nothing OPEC is doing is doing in cutting oil prices is keeping the price of oil stable.