Further oil cuts 'could affect economy negatively'

17 December 2008

Opec's plan to announce a further cut in production today is likely to have a negative impact on the economy, it has been claimed.

Speaking to Reuters, Harry Tchilinguirian of BNP Paribas said in the current economic outlook, a push for a higher price through a significantly deep cut could actually work against the cartel.

He added: "Establishing a price floor would be a more feasible target, implying a lower cut announcement than expected."

This comes after Opec revealed in a report this week that the biggest drop in global oil demand in 25 years will require the cartel to lower its supply.

Having already agreed to cut supplies by two million barrels a day back in November, the cartel still has too much crude stocked up because demand fell steeper than originally anticipated.

With demand so low across the globe, prices have been driven down and now stand at $100 (£64) less than they did in the summer - although bad news for the market, good news for heating oil customers feeling the pinch of the credit crunch.

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