Updated from 2:02 p.m. EST

So much for setting a floor for oil prices.

Crude oil plunged Friday, closing at a four-month low, even though OPEC decided to reduce production amid a steep price correction.

The January futures contract lost $1.82 to $40.71 a barrel, some 26% below the record closing high of $55.17 touched Oct. 26.

OPEC members meeting in Cairo agreed to a cut of 1 million barrels a day to the cartel's official production level of 27 million barrels a day, according to media reports. The reduction is effective Jan. 1.

Since July, the cartel has raised production on three separate occasions by a total of 2.5 million barrels a day, as it tried to cool the commodity's steep price appreciation.

After hitting a record high six weeks ago, prices have fallen on a regular basis, including a 14% selloff last week. Against that backdrop, the cartel is now worried about a possible collapse in price similar to the one that occurred in the mid-1990s.

Unseasonably warm weather in the northeastern U.S. and ample heating oil supplies have depressed prices.