Though the announcement was made last Wednesday, Brent prices actually fell from the week's high of $14.1 per barrel, which means that the market was expecting higher cuts from the Opec nations, and this turn means that the over-supply scenario is likely to continue. In other words the actual problem is on the demand rather than the supply side. In line with the slowdown in the world economy, oil consumption too has gone down. A pointerto this is the Baltic Freight index, which has touched an eleven-year low.

Further, negative growth trends have been recorded by the SE Asian tigers, including Japan. Consumption of oil for energy purposes is also at its low. One of the sectors known for high energy consumption is the metallurgical industry. Prices of almost all the ferrous as well as non-ferrous metals are touching new lows on lower offtakes. There is a limit below which any oil economy would like to cut down their oil production. Historical evidence proves that cuts as well as the OPEC quota have always been violated. Thus the latest announcements of cuts are unlikely to boost oil prices in the present context of depressed demand.