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LONDON -- U.S. light crude for January delivery dropped as low as $33.44 a barrel on Friday, the lowest it has been since early February 2004. Oil prices have fallen by more than $110 from their peak above $147 in July.
"Until traders see a sustained drop-off in the rate of demand destruction, the market will have a hard time establishing a floor," Jonathan Kornafel, Asia director of Hudson Capital Energy, told Reuters in London last week. "From a credibility standpoint, OPEC has no choice but to bite the bullet for the next few months."
The Organization of the Petroleum Exporting Countries (OPEC) pledged to remove 2.2 million barrels per day (bpd) from its supply, which would be the largest ever reduction by the producer group.
OPEC member, Saudi Arabia's Oil Minister Ali al-Naimi, speaking in London last week, said the kingdom would be pumping less oil in January and would be at its new output target in line with the group's latest cut.
But some analysts said they doubt OPEC, whose third production cut since September has brought its total reduction to more than 4 million bpd or 5 percent of world supply, will fully implement the agreed cuts, further weighing on prices.
"We believe that full implementation of the cuts is unlikely," Goldman Sachs analysts said in a note to clients.
Nobuo Tanaka, executive director of the International Energy Agency (IEA), said oil prices were responding to the global economic recession and investors would have to see how much actual supply cuts OPEC would deliver to the market.
OPEC President Chakib Khelil maintained he believed oil prices had found a floor around current levels.
"I don't believe there is any reason for it to fall any further. I don't see it going lower," he told Reuters.