Oil prices dropped $3 this afternoon after OPEC announced a record supply cut that dealers said would not be enough to counter slumping world energy demand.
US crude oil prices fell $3.00 to $40.60 a barrel by 4.35pm, while London Brent fell 80 cents to $45.85 per barrel.
Oil prices have fallen more than $100 since summer as a global financial crisis cuts into consumer and industrial fuel demand, and top forecasters are predicting the first decline in global energy use since 1983.
The Organization of Petroleum Exporting Countries announced Wednesday an agreement to cut 2.2 million barrels per day of output starting January 1st - the biggest single reduction on record - adding to previous cuts of 2 million bpd since September.
But oil dealers focusing on the global economic downturn reacted coolly to the announcement.
"It seems like despite the fact that the economies of producer nations are clearly in trouble, they don't have the temerity to actually go ahead and do the kind of cut that would be really interesting to traders to turn this around," said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.
Traders had expected a cut of at least 2 million bpd and several had hoped that oil producing countries that are not part of OPEC might have weighed in to support the OPEC cut to help bolster prices.
Neither Russia nor Mexico, which have co-operated with OPEC production cuts in the past, offered to reduce output.
OPEC is desperate to halt the slide in prices. Economists say that at $40 per barrel, 11 of OPEC's 12 members, as well as Russia and Mexico, face budget deficits.
Reuters