OPEC OIL PRODUCTION CUT INEFFECTIVE

Traders do not seem to believe that members of OPEC will truly cut production by 4%, as agreed upon October 19. According to Saturday's Washington Post, oil closed Friday below $57 per barrel for the first time in 2006. While it is in OPEC members best long-term interests to cut production, the short-term incentive of producing and selling as much as possible at high prices is too tempting to pass up. This leads to increasing supply and inventories, and lower prices result in the short-term and long-term markets.

For an interesting piece on the possible irrelevance, or at least ineffectiveness, of OPEC, check out this Street.com article by Christopher Edmonds.