Global markets are interlinked and heavily integrated. They play in unison and exceptions are rare. With bloodbath all around, nothing is safe — not even oil. These are volatile times and virtually all the commodities are under scrutiny. Global stocks are down and the slide continues, as if heading toward a bottomless pit. Gold and other commodities have lost their luster and glitter too. A new equilibrium is being looked at, and oil is no exception indeed. And interestingly despite the lowering prices, consumption is far from recovering. And no prospect is in sight too.

In these circumstances, can the OPEC succeed in stemming the downward slide? In the face of the ongoing global financial crisis, reversing the trend is a hard nut to crack for the OPEC. It is indeed not easy to salvage from a free fall situation. In the given scenario, it may again prove to be real difficult for the OPEC to sustain oil prices by cutting the output. In retrospect, over the past 10 years, OPEC had made three major output cuts, in 1998, 2001 and 2006 respectively, but each saw no immediate price rebound. Would this time be any different?

The immediate prospects seem remote. OPEC control of the oil markets are diminishing, it is difficult not to concede. It appears to have still less control over the crude market, especially in times when the world’s commodity markets are highly volatile. OPEC’s ability to channel the crude markets by adjusting the taps has steadily weakened, in the meantime, and it is in no stronger a position now.

The facts speak for themselves. After all it controls less than 40 percent of the market and non-OPEC players also have a role to play. Russia still controls roughly 11 percent of the market. And unless all these non-OPEC players also agree to work to sway the markets, it may be difficult to achieve. However, it does not mean that OPEC should sit idle and not do anything to stem the slide. That would be simply suicidal. It has to act!

Two factors outside OPEC’s direct control are contributing to the precipitous decline of crude prices. One is the strengthening US dollar. As the currency increases in value, the price of a barrel will inevitably fall as oil is purchased in dollars. The second is decreasing demand as economies across the world slow. And OPEC has no control on any of these, one has to concede. The whipping boy that OPEC has in the meantime become needs to be rested — at least this time — our good friends in Washington and London will have to understand.

The situation continues to be grim. In the immediate aftermath of the OPEC decision, oil options contracts in the NYMEX to sell crude at $50 by December almost tripled as the OPEC decision to slash production seemingly failed to allay concerns that the global economic slump is hurting demand.

The cost of the $50 December 2008 put option, which gives the holder the right to sell oil futures at $50 a barrel, rose last week to as much as 142 percent to $1.50 on the New York Mercantile Exchange, compared with 62 cents the day before, according to exchange data. On Oct. 3, the $50 December put option was valued at 1 cent a barrel, or $10 for the 1,000-barrel lot. The Nymex options contracts are for 1,000 barrels each, as are the underlying futures contracts. And in the meantime, the price of crude has tumbled 56 percent since rising to a record $147.27 a barrel in New York on July 11.

Speculators can profit from the rising value of put options by selling the options themselves back into the market. Alternatively, if crude futures fall below the $50-a-barrel “strike” price, holders of the put options, can exercise their right to sell futures at $50, and then buy the futures back for less in the market, making a profit.

Analysts said the production cut would not arrest the price fall and that demand for oil was likely to continue. “It certainly seems to me that we could get down to $50 a barrel,’’ Adam Sieminski, Deutsche Bank’s chief energy economist, said. “You could look at the OPEC cut as a sign of weakness, not strength,” he emphasized.

“Already we’ve seen demand destruction of two million barrels per day. I’m not convinced this cut will be enough to stop the slide,” says Rob Laughlin, at broker MF Global.

“Right now equities and the credit markets are more important than OPEC,” said Rachel Ziemba, an analyst at RGE Monitor, an economic research company in New York. “OPEC won’t be able to support the oil market until other markets find a bottom and begin to recover.”

“At this stage, it looks like we are at the edge of a bottomless pit and prices are heading quickly toward $50,” said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. “OPEC really needed to take the bull by the horns and make a bigger cut.”

“We believe this week will mark the start of a new quota reduction cycle by OPEC and it will continue through 2009,” Deutsche Bank analyst Michael Lewis said.

If prices keep falling, OPEC’s Chakib Khelil said, the grouping would “definitely” reduce its production again in coming months, either when it meets in Algeria in December, or even sooner.

In view of the falling prices and OPEC’s inability to stem the downward slide, the urgency for producers-consumers’ dialogue at the summit level also seems to have frittered away. There are confusing signals at this moment concerning the Dec. 19 meeting of the heads of state of oil producing and consuming countries, which was to be held in London as a follow-up to the Jeddah energy summit. This is not a good omen by any means. The energy world needs stability and not arms-twisting.

The downward slide could easily lead to a crisis of investment. This is a recipe for disaster and needs to be watched and underlined.

The Riyadh-based International Energy Forum Secretariat (IEFS) now has an even greater role to play in stabilizing the markets. The principle of fair return to the producers too needs to be addressed, before a new crisis erupts.

Noe van Hulst and his team at the IEFS have a ready-made task in hand. It could be different from that of the last few months where stabilizing the markets from a supply viewpoint remained the focus of attention. Now the scenario has changed altogether. Can the IEFS rise up to this new challenge?