Oil at year’s low after OPEC cut

Oil prices fell to their lowest level this year on Monday as dealers voted bearishly on OPEC’s convoluted output deal last week which is set to deliver less than a third of the promised 2 million barrel per day cut. Benchmark Brent crude oil dropped 45 cents to $23.64 a barrel, having touched a low of $23.40 for the first time since November 2002.

US oil prices, declining for the fifth day running, was down 61 cents at $25.65 a barrel. ‘‘The market has now had time to assess a very confusing OPEC decision last week and decided that it can only be bearish,’’ said Barclays Capital oil market analyst Kevin Norrish. ‘‘The high levels of production will continue through May.’’ The Organisation of the Petroleum Exporting Countries confounded markets last week by raising official supply quotas while claiming a huge two million barrel per day (bpd) cut in actual production.

Although the 10 members hiked production ahead of the war in order to prevent a repeat of the price spike seen during the 1990-1991 Gulf crisis, analysts said it had reached nowhere near the basis figure of 27.4 million bpd used to measure the cut. Iranian Oil Minister Bijan Zanganah conceded as much on Friday, saying production from the 10 members excluding Iraq would be around 26 million in April and May. This means the new ceiling from June 1 of 25.4 million bpd would only remove around 600,000 bpd from the market under the unlikely scenario of full compliance — less than a third of the cut OPEC claimed.

The cut also failed to meet expectations that the 10 members governed by quotas would agree to trim output back to the previous group limit of just over 24.5 million bpd during the second quarter, when seasonal demand is at its weakest.