Oil prices dips below $40

Oil prices tumbled below $40 a barrel for the first time since the summer of 2004 Wednesday as market ignores an announcement from OPEC of a record production cut of 2.2 million barrels a day.

Light, sweet crude for January delivery tumbled 8 percent, or $3.54, to settle at $40.06 on the New York Mercantile Exchange. Earlier, the contract fell to an intraday low of $39.88 a barrel in electronic trading on Globex. The last time oil prices dipped below $40 a barrel was July 21, 2004 before settling that day at $40.09.

The drop shows that even the mighty Organization of Petroleum Exporting Countries has little sway over a growing global recession, analysts said. Crude prices are down more than 72 percent from their summer peak of $147 a barrel and more than 52% over the past three months, yet tankers continue to idle in the Gulf of Mexico and other ports waiting for buyers.

OPEC had already announced cuts totaling 2 million barrels earlier this year, also with little effect. The unprecedented production cuts and the market reaction show just how fast energy demand has fallen during the worst economic downturn in at least a generation. Many countries around the world have slipped into recession, leading to a sharp decline in demand for oil.

Retail gas prices, which hit a low of $1.656 a gallon on Friday, rose to $1.667 a gallon Wednesday, according to auto club AAA, the Oil Price Information Service and Wright Express.