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Oil prices were flat Thursday after sliding to a 4 1/2 year low a day earlier as investors shrugged off an OPEC production cut.


U.S. crude for January delivery, which ceases trading Friday, fell 6 cents to $40 a barrel in early trading. The February contract, which begins its front-month run next week, fell 3 cents to $44.58.


On Wednesday, the Organization of Petroleum Exporting Countries, an international trade organization whose members supply about 40% of the world's oil, elected to cut production by 2.2 million barrels a day in January.


But investors were concerned about the slowing global economy's impact on crude demand - that sent the price down $3.54 to $40.06 a barrel Wednesday, the lowest close since July 2004.


"They're wondering whether OPEC can enforce this cut," because the budgets of many OPEC nations are already stretched incredibly thin, said Nimit Khamar, analyst with Sucden Financial in London.


Investors had also largely ignored OPEC production cuts made since September, totaling an additional 2 million barrels a day.


Falling demand: Oil prices have shed more than $100 a barrel since hitting a record high of $147.27 a barrel in July as worldwide demand began to decline.


In the United States, the world's largest oil consumer, Americans cut back drastically on driving over the past year, according to a government report.


"We're seeing demand slip everywhere, including China," said Khamar.
Rapidly expanding export-based economies of nations such as China and India are beginning to suffer as much as their counterparts in the developed world, where cash-strapped citizens are consuming less of everything.


Looking long-term, the Energy Department said Wednesday that crude oil could rise again, reaching $130 a barrel in 2030 as global supplies diminish, but it also predicted that demand for fuel would rise by only 1 million barrels a day during that two-decade time period.

December 18, 2008