The Organization of Petroleum Exporting Countries has agreed to cut production more than ever just weeks after a previous motion to cut, as oil prices dipped a few dollars more late Thursday to around $40 a barrel.

To slow oil’s half-year, $100 slide member states agreed to stop producing a combined 4.2 million barrels a day, including a 2 MMbpd cut agreed last meeting.

Opec will from January first be producing 24.84 MM bpd after Wednesday’s 2.2 MM bpd decision. The cartel said it had to counter demand destruction said to be occurring “at an unprecedented rate” due to “the grave global economic downturn”.

Meanwhile, the supermajors are stockpiling oil in tankers, just as Russian oil companies have publicly been told they can produce less in 2009. Opec said it was aware that the stocks of Western countries “are well above their five-year average and are expected to continue to rise.”

“Having reviewed the oil market outlook, including overall demand/supply projections for the year 2009, in particular the first and second quarters, the Conference observed that crude volumes entering the market remain well in excess of actual demand,” a joint communique said.

Opec’s basket of oils from the developing world was worth an average $42.53 per barrel early Thursday, but by day’s end it had lost up to three dollars.
Elsewhere, the spectre of new Iraqi, Iranian and oil sands production hitherto on hold is believed to be keeping prices low, as have American drivers feeling the credit woes.

Opec contended that if oil prices remained unchecked, prices could fall to levels which would hurt investments needed to guarantee energy supplies medium and long-term.

Meanwhile, Opec delegates welcomed Azeri, Russian, Omani and Syrian observers to their 151st summit in Oran, Algeria. They agreed to meet again on 15 March 2009 in Vienna, Austria.