Oil prices slump to more than four-year lows under 38 dollars

LONDON - Oil prices tumbled Thursday to the lowest points for more than four years, diving under 38 dollars per barrel in New York, as traders suggested that OPEC would not fully enforce a record output cut.

On the New York Mercantile Exchange (NYMEX), light sweet crude for delivery in January dived to 37.68 dollar a barrel ahead of the contract's expiry on Friday. The low point was last seen in July 2004.

On London's InterContinental Exchange (ICE), Brent North Sea crude for February sank as low as 44.30.

In later deals, New York crude stood at 38.55, down 1.51 dollars from the close on Wednesday. Brent oil was 53 cents down at 45 dollars per barrel.

The Organisation of the Petroleum Exporting Countries (OPEC), which produces about 40 percent of the world's crude, approved a record output cut on Wednesday of 2.2 million barrels a day.

However, the decision failed to prevent prices plunging even further, as rising US energy reserves also heightened global demand worries amid a sharp worldwide economic slowdown.

"The verdict (of falling prices) was a resounding vote of no-confidence in the cartel's ability to curtail production given its previous tendencies to backslide on commitments, particularly by countries who are financially strapped," said MF Global oil analyst Ed Meir.

Despite the output reduction on Wednesday, New York crude dropped a hefty 3.54 dollars and London Brent oil shed 1.12 dollars.

"OPEC cut more then two million barrels of oil from its production yesterday," added BetOnMarkets analyst David Evans.

"However, prices tumbled as most traders questioned if organization could actually enforce the production cut," he said.

"Not helping oil prices is the fact that US inventories climbed again," he added.

The US Department of Energy reported on Wednesday that American crude oil stockpiles climbed by 500,000 barrels in the week ending December 12, which was five times market expectations and indicated weaker US energy demand.

Ministers of the 13-member cartel, meeting in Oran, Algeria, agreed to the reduction in a bid to shore up prices, which have slumped from record highs above 147 dollars in July due to falling demand in a slowing global economy.

It was the third time in three months that OPEC has lowered production, and the largest reduction since the cartel introduced production quotas in 1982.

Before the latest cuts, OPEC's official daily output target was 27.3 million barrels a day.

Prices also slid despite the dollar's recent sharp fall against other major currencies, days after the Federal Reserve slashed its base lending rate to virtually zero.

A weak dollar normally lifts the price of dollar-priced oil for buyers using cheaper currencies.