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Why OPEC Can't Halt the Price Slide

As demand falls, the U.S. crisis rules out a cut in output

On the surface at least, the ambience at the OPEC meeting that began in Vienna on Sept. 26 was much the same as usual. Reporters lounged in hotel lobbies, ready to waylay ministers. Upstairs, OPEC delegates conferred over grilled marlin steaks and bottles of earthy shiraz. But behind the routine, there was a sense that OPEC may again be losing its grip on the oil market.

Although prices surged in the hours following the attack on the Twin Towers, they have plummeted in recent days by about 30%, to $21 per barrel. Traders suddenly are less worried about supply problems. They fear that demand could drop and that OPEC may be unable to respond in its usual fashion with cutbacks. "There is no question that the events of Sept. 11 have caused some definite impact on the market," says Ali Naimi, Saudi Arabia's Minister of Petroleum & Minerals. "Now, the market believes demand is going down as a result of these events."