They then rose again in offshore trading overnight as analysts looked at the statements from OPEC and some of its members and Hurricane Ike looked threatening. But they finished around $US102.50 a barrell, roughly steady on the Wednesday morning levels. When asked about the size of a proposed cut to OPEC's current production, president Chakib Khelil was quoted by newsagencies as replying: "I think if you do your own calculations, it is a cut of 520,000 barrels per day.
"Actions (to cut output) will be taken by members as soon as they can, that means in the next 40 days," he added. A statement earlier from OPEC said members had agreed to "strictly" comply with a quota target of 28.8 million barrels per day excluding Indonesia and Iraq.
But whether they will is another thing because at these lower prices; there's pressure on some countries to maximise their national incomes, especially with demand slowing and the member countries (especially Iran and Venezuela) having cash flow problems with rapidly increasing costs.
Iran for example, imports over half its petrol needs, and yet it is a major oil and gas producer and exporter. Just who cuts and by how much will now have to be sorted out: Saudi Arabia as the major producer might be asked to wear most of the cut, seeing it boosted its output this year to a 25 year high.
But there have been reports the Saudi government has grown concerned about the impact high oil and petrol prices was having on demand for oil and related products. US users have cut consumption by 3.5% this year, with much of that in petrol as drivers use their cars less or switch to more efficient vehicles.
And high oil prices have bright difficulties for the Saudis and others in the Gulf with currencies pegged to the US dollar: the drop in the greenback over the past six years to mid-July brought with it rising costs and a nasty bout of embedded inflation.
Now the greenback has risen sharply, and their currencies are rising, this should help ease inflation (and lower the cost of food imports which have been another headache).
OPEC noted that a declining global economy and resultant fall in demand for oil, along with higher supply and the gains in the US dollar had cut prices, but not in countries and regions in Asia, Europe and Australia where local currencies have declined sharply in recent weeks against the greenback. That means that the benefits of the fall in oil prices haven't been fully reflected in those economies.
"The Conference reviewed current oil market conditions and future prospects and observed that production action taken by OPEC Member Countries has ensured that the oil market is well supplied and has enabled inventories to be built up to comfortable levels in terms of forward demand cover.
"It further noted that prices have dropped significantly in recent weeks, driven by a weakening world economy, in particular in major OECD countries, with its concomitant lower oil demand growth, coupled with higher crude supply, a strengthening of the US dollar and an easing of geopolitical tensions. "All the foregoing indicates a shift in market sentiment causing downside risks to the global oil market outlook."
But the OPEC statement ignored the impact the falling non-US currencies was having on oil prices in Europe, the UK, Asia and Australia and made that remark about "a shift in market sentiment causing downside risks''. (Those downside risks are to the oil price and the economies of OPEC member countries.)
That explains, as much as anything, why OPEC then went on to say this:
"Since the market is oversupplied, the conference agreed to abide by September 2007 production allocation (adjusted to include new members Angola and Ecuador and excluding Indonesia and Iraq) totaling 28.8 million barrels a day. Levels with which members committed to strictly comply.''
OPEC's quota for 12 members including Indonesia had been 29.673 million barrels a day. Indonesia's target had been 865,000 barrels a day. Indonesia's full membership was officially suspended at the Vienna meeting because it now imports more oil than it exports.
OPEC is responsible for around 40% of Global oil supplies and under pressure from the US and other major consumers had increased production this year as Saudi Arabia, the world's largest producer, boosted its output by around 700,000 barrels a day to balance shortfalls elsewhere.
Those shortfalls come principally from Iran, Venezuela and Nigeria, according to oil industry analysts, plus the lost production from Indonesia.
So cuts of 520,000 barrels a day (if they are met in full), will still leave a bit more oil available from Saudi Arabia, unless it decides to cuts. Some Asian oil refiners have been reported in recent weeks as being told that there will be less crude oil available from Saudi terminals in the next few months. But there has been nothing official.
Furthermore, traders said that once the US hurricane season finishes in the next month, prices are likely to soften further. The current spate of storms through the US Gulf of Mexico and along the South Eastern states have helped support prices above the $US100 a barrel mark.
For Australia the OPEC news is not great: the weakening Aussie dollar is now a greater influence on our oil and petrol prices than the world oil price. While petrol prices have eased, they haven't as sharply as the drop in oil prices.
Petrol prices are still around 25% more than they were a year ago, but with oil trading at $US102 a barrel this morning in Asia, and the Australian dollar just under 80 USc this morning, there won't be any significant fall coming either to relieve the pressure, despite what the NSW NRMA might be demanding in yet another statement today.
If the Australian dollar was still at 98 USc, around a 25 year high, and oil was around $US103 a barrel, the Australian dollar price would be around $A105 a barrel. Instead it's well over $A128 a barrel and that's why petrol prices are stuck around the current levels of $A1.50 a litre or more in some areas.
But as oil and commodity prices drop and foreign investors lose their taste for risky and high yields, so the Australian dollar falls. It has lost more than 18 USc, or around 19% in the last of seven weeks.
