David Prosser: The oil market laughs in the face of Opec

Outlook It was difficult to suppress a smile as the oil price fell to a four-and-a-half-year low yesterday, just 24 hours after Opec announced its biggest ever reduction in production. The problem for the cartel is one of credibility – many in the oil market simply do not believe individual Opec members will stick to the commitments made on production cuts on Wednesday.

Opec's lack of credibility is of its own making. As the oil price soared to a record high in the summer, the organisation promised to increase production in order to bring it back down. Its pledges were repeatedly broken by certain Opec members, one reason why prices stubbornly refused to fall.

On Wednesday, Opec was still trying to finesse its news, announcing it had agreed a 4.2m barrels per day production cut. The headline figure, however, included a 2m reduction previously announced – this was a clear attempt to stage-manage the oil price upwards. So far, it has failed.