* OPEC's record output cut fails to halt unprecedented dive
* Oil, $107 off its peak, hovers at lowest since July 2004
* Higher U.S. crude inventories add to oil demand gloom
(Adds background, JPMorgan forecasts, updates prices)
By Annika Breidthardt
SINGAPORE, Dec 18 (Reuters) - OPEC's biggest production cut
ever failed to aid oil prices on Thursday, with U.S. crude
hitting a four-and-a-half-year low under $40 as traders doubted
the cartel's ability to curb output fast enough to match
collapsing demand.
At $40 a barrel, oil is more than $107 off its July peak,
having shed almost three quarters of its value as the onset of
a global recession cuts into fuel demand. Top forecasters are
now predicting the first decline in world energy use since
1983, and a rise in weekly U.S. crude oil stocks added to the
gloom.
"At $147 they produced everything they could but that did
nothing to lower prices. At $40, they also can do nothing to
stem the price fall," said Tetsu Emori, who runs a commodities
fund at Astmax Co Ltd in Japan. "Their policy is not really
working."
U.S. light crude for January delivery <CLc1> tumbled nearly
8 percent on Wednesday as traders dismissed OPEC's 2.2 million
barrel per day (bpd) output cut to focus on the weekly data.
The contract deepened those losses to hit $39.19 on
Thursday, its lowest price since July 2004, but was trading up
19 cents at $40.25 a barrel by 0751 GMT.
London Brent crude for February <LCOc1> shed 43 cents to
$45.10.
The Organization of the Petroleum Exporting Countries
agreed on Wednesday to its third production cut since September
in an increasingly urgent bid to support prices, bringing its
total reduction to over 4 million bpd or 5 percent of world
supply.
But for those curbs to be effective, the fractious group
will need to enforce compliance, historically a tricky task in
a falling market. The group's compliance in November to
existing cuts was only just over 50 percent, according to OPEC
estimates.
"Countries other than the Saudis are going to have
difficulty complying with this cut. Those oil producing
countries, if they want to survive, they have to produce, even
at $40," said Emori.
And the outlook for next year grows bleaker by the day as
economic indicators show a deep global recession taking hold,
causing oil demand to fall from the United States to China.
JPMorgan cut its 2009 crude oil forecast to $43 a barrel
from a previous $69 a barrel expectation following OPEC's cut,
and many analysts say more losses could be in store until more
supply is taken off the market or demand starts to level off.
"Prices have to head lower, now that we are through $40. As
long as demand continues to weaken, prices will weaken too,"
Emori added.
Traders also took their cue from U.S. crude oil and refined
fuel stocks, which rose last week as imports of oil products
increased, while domestic refiners cut output due to soft
demand.
Commercial crude oil stocks in the United States rose
500,000 barrels to 321.2 million, the Energy Information
Administration said. []
It also said oil demand in the world's top consumer was
expected to grow by only 1 million bpd over the next two
decades, or 0.2 percent a year, as higher vehicle fuel
standards and increased use of renewable fuels stifle
consumption.[]
(Editing by Sambit Mohanty)
