Flooring News and Information

Vienna, Austria, Nov. 16—Good news for consumers and floorcovering manufacturers. Oil prices fell to their lowest level in more than two years despite efforts by OPEC to shore them up, which analysts said could further push down prices at the gas pump.

Setting up a showdown with Russia and other producers outside the cartel, the Organization of Petroleum Exporting Countries—struggling to stabilize plummeting prices—agreed to cut output beginning next year, but only if non-OPEC producers also tighten their taps.

OPEC delegates said they would reduce their daily production target by 1.5 million barrels, or 6%, starting the first of the year, on the condition that outsiders such as Russia, the world's #3 producer, cut their own output by 500,000 barrels a day.

Kuwaiti Oil Minister Adel al-Sabeeh said that crude prices could fall as low as $10 a barrel if the standoff between OPEC and non-OPEC producers over oil output persists.

As the market moved closer to an oil price war, traders reacted almost instantly to the uncertainty with a sharp sell-off in petroleum futures.

December crude oil futures dropped as low as $17.15 a barrel on the New York Mercantile Exchange on Thursday before closing down $2.29 at $17.45 a barrel, the lowest level for a front month contract since June 1999.

December heating oil futures tumbled 5.03 cents to close at $51.09 a barrel, their lowest level since August 1999, while the December gasoline futures contract ended down 4.53 cents at 48.84 cents a gallon, a 29 month low.

The global economic slowdown has dented demand for crude, and lingering uncertainty from the terrorist attacks on the U.S. has worsened OPEC's financial problems. Prices have tumbled by a third since September 11 alone.

Although analysts warned that a prolonged slump in oil prices could discourage companies from exploring new fields and developing older ones—setting the stage for sharply higher prices in the future—the immediate fallout could be lower prices for consumers for gasoline and home heating oil.

For the short term, at least, they could also provide relief to airlines skirting bankruptcy since the attacks by cutting prices for jet fuel, and help truckers by easing diesel prices.

On Thursday, OPEC’s most powerful member—Saudi Arabia, the world's top oil producer—revealed its frustration at Russia's refusal to make anything more than a token cut in output. OPEC sees Russia's cooperation as an essential part of the group's effort to stem the collapse in oil prices. OPEC would “absolutely not” cut production without a corresponding decrease of 6.5% in oil exports from Russia, Oman, Mexico and Norway, according to Saudi Oil Minister Ali Naimi.