by Calculated Risk on 12/17/2008 04:01:00 PM

From the WSJ: OPEC Announces Biggest Cut in Decades

OPEC announced on Wednesday an unprecedented production cut of 2.2 million barrels a day as the group added heft to its recent fledgling efforts to shore up the price of crude.
...
"We needed to do something big. Demand is falling fast," Kuwait oil minister Mohammad Al Olaim told Dow Jones Newswires after the meeting. The new cut represents more than 2.5% of world oil demand.

From MarketWatch: Oil futures fall 8% after OPEC cartel cuts output

Crude-oil futures tumbled 8% Wednesday, paying little heed to a widely expected production cut of 2.2 million barrels in current oil output by the OPEC oil cartel.

Crude for January delivery fell $3.54, or 8%, to end at $40.06 a barrel on the New York Mercantile Exchange
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OPEC members "are shooting themselves in the foot. The market priced in these production cuts," said Dan Flynn, an energy trader at Alaron Trading in Chicago.

"I believe right now we have a glut of oil in the United States," Flynn said. "Because of the global economic slowdown, demand is going to be down in all sectors."

Flynn expects oil prices to be between $30 and $35 a barrel over the next few weeks.

Besides the weak global economy, everyone believes OPEC members will cheat if they can.