SAN FRANCISCO (MarketWatch) -- Crude-oil futures tumbled Friday to close at their lowest level in 17 months, down 11% for the week, as a production cut by some of the world's key oil producers failed to ease concerns over a slowdown in oil demand.

"The market isn't interested in supply issues with world demand the question," said Darin Newsom, a senior analyst at DTN.

The Organization of the Petroleum Exporting Countries will slash its oil production quota of 28.8 million barrels per day by 1.5 million barrels, beginning November 1, as the world's financial crisis dampened demand for energy, the cartel said Friday at a meeting in Vienna.

Crude for December delivery closed at $64.15 per barrel on the New York Mercantile Exchange, down $3.69, or 5.4% for the session to lose 11.1% for the week. That was the lowest closing price for a front-month futures contract since May 31, 2007.

In electronic trading on Globex, the contract touched a low of $62.65.

Prices have lost more than $80, or 56%, from their record high above $147 a barrel hit in July.

Crude's losses came amid broad declines in other commodities and in global stock markets. The Dow Jones Industrial Average DJIA, -0.47% slumped nearly 4%. See Market Snapshot.

"In the current environment of a rapidly strengthening dollar and deteriorating economic indicators, the short-term price risk remains skewed to the downside" for oil, analysts at Credit Suisse wrote in a research note.

"Oil prices have witnessed a dramatic collapse -- unprecedented in speed and magnitude -- these falling to levels which may put at jeopardy many existing oil projects and lead to the cancellation or delay of others, possibly resulting in a medium-term supply shortage," OPEC said in its statement. See full OPEC story.

"They're trying not to prop up, but stabilize prices," said Vera de Ladoucette, Cambridge Energy Research Associates' senior director of Middle East Research.

“ 'They're trying not to prop up, but stabilize prices.' ” — Vera de Ladoucette, Cambridge Energy Research Associates

"Demand is collapsing," she said. "And actually what dawned on them this time is that demand was not there."

"What they're trying to do is prevent inventories from growing in the fourth quarter [of this year] and first quarter of next year," she said.

The slowdown in oil demand is "serving to exacerbate the situation in a market which has been over-supplied with crude for some time," OPEC said in its statement. "Forecasts indicate that the fall in demand will deepen, despite the approach of winter in the northern hemisphere."

OPEC said earlier this month that global oil consumption will grow 550,000 barrels a day this year compared with a year ago, down 330,000 barrels from last month's forecast. Total consumption will stand at 86.5 million barrels a day, said the cartel, which controls nearly 40% of the world's oil production. See full story.

Trim down

Although OPEC said it was going to cut its production ceiling, it's important to note that the cartel's members often produce more than their quotas, analysts said. Total OPEC production stood at 32 million barrels a day in September, according to OPEC's latest monthly report.

The official production quota is currently 28.8 million barrels, and it will be cut by 1.5 million in November.

The quota excludes Iraq and Indonesia, which is suspending its OPEC membership as of Jan. 2009, according to de Ladoucette.

Bear in mind that "OPEC is producing some 300,000 barrels per day above its target," said Kate Dourian, Platts' Middle East editor.

The market "cannot assume 100% compliance with the new targets," she said in emailed comments. "We normally assume compliance of around 60%."

De Ladoucette said she expects OPEC members to be 80% compliant with the production cuts by December.

"I do not think OPEC will live by their new quota, nor is their problem of a sinking oil price over for them," said Charles Perry, president of energy-consulting firm Perry Management, in emailed comments.

“ 'I do not think OPEC will live by their new quota, nor is their problem of a sinking oil price over for them.' ” — Charles Perry, Perry Management

Analysts had been expecting a cut between 1 million and 1.5 million barrels a day, though a few observers said the cuts could reach as high as 2 million. See Commodities Corner.

"There is some evidence that crude-oil buyers are buying less oil, partly because they cannot raise credit and partly because there is no demand," said Dourian of Platts.

Still, the White House denounced OPEC production cut as an "anti-market" decision.

"It has always been our view that the value of commodities, including oil, should be determined in open, competitive markets, and not by these kinds of anti-market production decisions," said spokesman Tony Fratto.

OPEC said that the biggest producer, Saudi Arabia, is cutting 466,000 barrels a day, with six-figure declines also coming from Iran, Kuwait, the United Arab Emirates and Venezuela.

Cartel members said they're going to meet again on Dec. 17, in Oran, Algeria. But they didn't give a specific commitment to cut production further.

Neal Ryan, a managing partner at Ryan Oil & Gas Partners, said he believes OPEC will have "another extraordinary meeting next month -- assuming there is any legitimate follow through on this announcement."

Energy bandwagon

Other energy futures followed oil's lead, closing sharply lower with reformulated gasoline suffering the most.

"Along with every other asset class, energy is caught in the global selloff," said Ryan. "That being said, I think the market was still hoping for more of a cut out of OPEC to really get things moving, and the proof is still going to be down the road when there is actual follow through on their announced cuts."

November reformulated gasoline fell 10 cents, or 6.3%, to end at $1.4779 a gallon.

Based on a survey of gasoline retailers, prices for regular gasoline at the U.S. pump fell more than 4 cents a gallon from Thursday, hitting a national average of $2.781 Friday, according to AAA's Daily Fuel Gauge Report. Gas prices are now lower than a year ago.

Among the heating fuels, November heating oil fell 4.1%, or 8.3 cents, to close at $1.9465 a gallon and November natural-gas futures lost 2.8%, or 18 cents, to finish at $6.239 per million British thermal units.

On Friday, analysts at Pritchard Capital Partners LLC lowered their natural-gas and oil-price assumptions for the fourth quarter of this year and for 2009.

In a research note, they said the cut was "based on slower global GDP growth and our forecast for flattish natural-gas demand in 2009 as increased demand from the power sector is offset by conservation and slower economic growth levels that will impact industrial demand."

They estimate crude prices of $72.50 in the fourth quarter, down from a previous estimate of $110, and a natural-gas price of $7 per thousand cubic feet for the fourth quarter, down from the old estimate of $10. For 2009, they predict a crude price of $75, down from the previous $100 estimate, and natural-gas prices of $7.50, down from the old estimate of $9.

Tracking the commodities market as a whole, the Reuters/Jefferies CRB Index CRB, -1.01% , a benchmark gauging the prices of major commodities, fell by 3.2%.

Gold futures dropped a low of $681 an ounce, then recovered to close more than 2% higher. They still lost 7.3% for the week. See Metals Stocks.