Higher Prices Elude OPEC

Saudi Arabia may think that $75 per barrel is a "fair price" for crude, but oil futures slipped further away from that target on Monday as bearish investors saw little hope of demand recovery, despite promises of a production cut from the Organization for Petroleum Exporting Countries in December.

Oil futures dropped to $52.10 per barrel, from $54.43, on the New York Mercantile Exchange, while Brent crude fell more than a dollar to $50.58 per barrel in London. Shares of BP (nyse: BP - news - people ) fell 1.6% in London, with Royal Dutch Shell (nyse: RDSA - news - people ) down 1.9%.

Oil-exporting cartel OPEC made no changes to its production quotas at an informal meeting in Cairo over the weekend--as expected--and an almost-certain cut later in December is not bringing any sense of confidence back to the energy markets.

OPEC is, to a large extent, a victim of bearish market sentiment rather than its own quotas. It is difficult to see how frantic cutting would help the cartel, given that it needs to make sure its already-wavering credibility does not suffer in an environment of falling prices. The 13-member outfit has only just pushed through a cut of 1.5 million barrels, announced in October, which needs to be proven right rather than immediately increased.

"OPEC has done all it could do," said Catherine Hunter, an analyst with IHS Global Insight. She told Forbes.com it was "just too early" to announce a cut over the weekend, so soon after last month's 1.5 million-barrel cut, and that the cartel's meeting in Algeria in December would be a much better time to unveil a cut of between 1.0 and 2.0 million barrels. (See "OPEC's Prelude To A Cut.")

Khelil told reporters in Cairo on Saturday that last month's announced cut was being implemented, according to "preliminary industry indications," and that OPEC member countries were clearly sticking to their promises. Mounting a unified front is crucial for OPEC in the current climate, with skeptics doubting the ability of countries like Iran and Venezuela to sacrifice valuable oil revenues for the greater good.

But the mooted target of $75 per barrel, described as a "fair price" by Saudi King Abdullah in an interview with a Kuwaiti newspaper, still seems elusive. The global slump has even taken the wind out of commodity-hungry China, which the World Bank expects to grow at an 18-year low of 7.5% next year.