Updated from 10:47 a.m. EDT
Crude-oil futures fell to nearly a one-year low Friday amid doubts OPEC's larger-than-expected production cut would be enough to halt the slide in crude prices.
The Organization of the Petroleum Exporting Countries will reduce daily output by 1.2 million barrels starting Nov. 1, members decided late Thursday at an emergency meeting in Qatar. Members increased the reduction from an initial 1 million barrels and opted not to trim official quotas.
"When we advertised 1 million, the market didn't respond, so something more had to be done," OPEC President Edmund Daukoru told
In December, the group may reduce production by another 300,000 barrels if crude prices remain below $60. Saudi Arabia, the group's largest producer, will bear the brunt of the cuts, trimming output by 380,000 barrels per day. Iran will cut back by 170,000 barrels.
Light, sweet crude, the benchmark contract on the Nymex, for November delivery closed down $1.68 to $56.82 a barrel. Crude was last this low in mid-November last year. Trading was choppy Friday partly due to the expiration of the November contract.
Wholesale unleaded gasoline lost 2 cents to $1.46 a gallon and heating oil shed 3 cents to $1.68 a gallon. Natural gas soared 10 cents to $7.24 per million British thermal units on cooler-than-average temperatures.
The cartel was content to keep production at record levels as recently as September, but quickly took another look at production levels once crude prices slipped below $60 in the past month. An economic slowdown, robust inventories and little hurricane activity in the Gulf of Mexico have helped drive down crude prices by about 25% since mid-July.
The reduction is OPEC's first in nearly two years, but it may not be the last. If it doesn't dampen prices, OPEC will likely have to trim further at its Dec. 14 meeting in Nigeria.
High inventory levels, slowing economic growth and members not adhering to the reduction could temper the effect of the decrease.
"We think the markets will be enamored by the OPEC cuts for another day or two before participants start having second thoughts," writes Edward Meir, an energy analyst at Man Financial in Darien, Conn.
"We still maintain that even with a 1.2 million barrel cut, OPEC is behind the curve, and will have to do more in December, and a lot more if there is cheating going on, if it is to return some balance to the market," he continues.
Supplies of gasoline, distillates, natural gas and crude are 6% to 15% above the same period last year largely due to mild winter temperatures last year and the lack of hurricane damage to the country's oil installations.
Energy stocks were slipping, with shares of drillers and refiners losing 0.5% on the Amex Oil Index.
were leading declines on the index, down about 1.6%.
Oil field services companies on the Philadelphia Oil Service Index weren't faring as well and were recently down 1.8%.
National Oilwell Varco
were leading declines, down as much as 3.7% on the index.
Schlumberger reported net income nearly doubled in the third quarter to $1 billion, or 81 cents per share, on higher demand for its drilling and seismic services. Sales climbed to $4.95 billion, up from $3.7 billion in the same period last year.
The results handily beat analysts' estimates of earnings of 77 cents a share on sales of $4.94 billion. Still, shares of Schlumberger were last dipping 3.7% to $60.36.