The unemployment numbers just came out and showed that the U.S. economy lost 467,000 jobs last month. That was the trigger for the oil traders. Within a few minutes oil dropped $2.02 per barrel to $67.19 at 9:07 EDT.

Adding fuel to the decline was the report that gasoline stockpiles rose by 2.9 million barrels, but crude dropped 3.7 million barrels.

Oil moved up above $70 early in the session, but was unable to hold that momentum through the day. After its strong start to the day, prices dropped $2.19 to $67.83.

A major reason for the drop in prices can be attributed to the World Bank. The World Bank slashed its forecast for this year's global economic growth, and reported that the current recession is deepening.

Given oil's recent run-up, at times it appears that all oil/natural gas plays have been bid-up, but Devon Energy (NYSE: DVN) hasn't and it's worth a review.

Devon's shares were rudely treated by the Street from mid-2008 to early-2009, following the collapse in oil prices. Some of it was justified, due to the large, likely decline in FY 2009 revenue stemming from crude's price collapse. But valuing DVN with a p/e of 6 or 7 is a tad low, given the company's assets, hence the Buy rating that has been generated here.

Why is there conflicting information coming out of the oil patch? One minute we hear that there's an oversupply of oil sitting in supertankers offshore. Now Saudi oil minister Ali Naimi says that higher consumption in China is driving up prices. He further states that the world economy has recovered enough to sustain $75 to $80 per barrel oil. Is some of this just hype ahead of tomorrow's OPEC meeting?

We should keep in mind, however, that markets do not always move on fundamentals. Very often "perception" plays a bigger role. Prices have recovered from $32.70 in February to $63 per barrel recently. Much of this increase, even Mr. Naimi concedes, is due to speculation.

Earlier in the session we were looking at lower oil prices, but the mood has changed, and the precious crude is trading higher with the overall market today, picking up nearly 2.5% on the day.

Yesterday, despite rumors to the contrary, OPEC decided to leave its oil output alone, and this had the initial reaction of sending prices lower in early morning trading. With oil prices falling sharply since last summer, many analysts had been expecting to see a production cut from the group, but instead OPEC announced that it would be leaving its output unchanged, and stated that previous cuts were starting to take effect.

Put yourself in the shoes of the OPEC ministers meeting this weekend in Geneva. They will be sitting down and discussing the current supply/demand for oil in the coming months. The world is in crisis and OPEC has cut oil production several times over the past year. Now they must decide again what to do.

Here are some cold facts. OPEC expects oil demand to fall by 1 million barrels per day in 2009. That in itself is not so unusual, but now look at the one. Demand growth from developing countries is shrinking by 80% compared with last year. There is a glut of oil in storage and in tankers around the world, with estimates of a 57-day supply. This excess supply is unusually high by OPEC's standards.

Very often you can get a sense of the way a market is reacting by what is not happening. OPEC is meeting next Sunday to review their strategy in light of the current financial crisis. There is an indication that OPEC may not cut production this time around. Why is this?

Here are several reasons why we may see things stay as they are. First and foremost is that OPEC members "talk the talk" but they all do not "walk the walk." For example, Saudi Arabia has cut production by 16% since September but Iran cut its production only 4.3% and Venezuela cut its production by 8.3%. So as usual OPEC has difficulty holding each of its members to an agreed upon reduction.

"Long term, supply remains the key issue to watch in the crude oil market; depressed prices continue to force producers to scale back on exploration and development spending," says energy expert Elliott Gue.

In The Energy Strategist, he says, "I watch oil service giant Schlumberger (NYSE: SLB) as a gauge of overall health in energy markets; it has its hands in just about every imaginable oil- or gas-producing market on the planet."

"Schlumberger's fourth quarter earnings release and conference call were far and away the most bearish from the company in at least five years.

"CEO Andrew Gould was notably downbeat, particularly during the analysts' question and answer (Q&A) session. Predictably, earnings estimates have plummeted since that call.

There are two competing forces at work in the oil market. On the one hand, OPEC has already cut production by 4.2 million barrels per day since last September. OPEC's secretary has said the producer group was willing to make further cuts when it meets in March. The price of crude has been holding steady near (above or below) the $40.00 per barrel mark.

Another factor weighing on the market is the threat of some 30,000 U.S. refinery workers who may go on strike. This can bring our refinery capacity to a virtual standstill. In Britain, workers staged an unofficial walkout on Friday in protest over the use of foreign workers.

Oil prices are getting a big boost today, as investors are betting on hearing news of huge production cuts coming out of OPEC this week.

With oil well off its highs from over the summer, many had already been expecting to see OPEC step in and cut production, but earlier this month OPEC made it clear that it wants to shock the market into sending prices higher.

Prices have moved up over $50 a barrel today, hitting a high of $50.05, but have cooled off slightly and are currently sitting at $49.25, up $2.97 as we await to hear exactly how deep the production cuts could run.

OPEC members have not been in concert about when to cut production and by how much. The cartel's November meeting came and went. Nothing happened. Some members were accused of not following the September cut plan.

But, now crude is moving toward $40 and some of the producing nations are in real financial trouble. Russia, which is not a member, is also pushing cuts to bring prices back up, at least to the $60 level.

The financial pain of oil prices that are too low to make big money is about to force action by the cartel. According to Reuters, "There is an OPEC consensus on the reduction. But I can not tell you (more)," said OPEC President Chakib Khelil.

It was assumed before the November meeting that a production cut of two million barrels of oil a day would do the trick. Since then there have been reports that worldwide consumption of crude will drop for the first time since 1983. And, China is actually importing less than it has in a decade.

What happens now? It is anyone's guess, but a chop of 2.5 million to 3 million barrels a day in production would certainly not be surprising. If that happens crude could go up $20 in a flash.

Douglas A. McIntyre is an editor at 247wallst.com

The Saudis announced an oil production cut of 8% to 8.47 million barrels per day and the price Light Sweet Crude rallied sharply early this morning ended up only $1.75. Why is that? Well the U.S. announced that product demand dropped by 6.1%. So while traders were exuberant this morning and drove prices up, by the afternoon, caution has replaced euphoria.

Trading can be an emotional game, often alternating between euphoria and despair in a matter of hours. Traders who bought this morning are now holding a loss. A good trader has taken his/her loss and will come back tomorrow, having erased this day from his/her mind.

Now, here comes the real dilemma. Since the price of Light Sweet Crude did not hold its gains today, does this mean that oil will continue dropping or will the price stabilize at these levels and then move higher? This is a high stakes game that obviously affects our economy. On the one hand, the U.S. wants low oil prices to energize our economy, while on the other side of the world the Saudis want oil to climb back up to $60-75 per barrel. Keep an eye on this one.

For those of us who were dying for relief from record high gasoline prices this summer, the recent drop in oil prices comes as great news, but this is not the case for everyone. OPEC, which supplies the world with roughly 40% of its oil, would like to see prices rise higher again, and today gave a clear sign that larger than expected production cuts are on the horizon.

In an interview today, the President of OPEC, Chakib Khelil, stated that a consensus had been reached for cuts at the next meeting of the oil cartel. The next scheduled meeting is on December 17, and according to Khelil, the market will be surprised.

Khelil stated that the he felt the best way to get a quick boost in oil prices is to shock the market, and he felt that the upcoming production cuts would be able to do just that. While he did not indicate exactly how large the production cuts would come, he left no doubt that they will be substantial.

"The stronger the decision, the faster prices will pick up," Khelil said.

With oil moving toward $50 a barrel, it would be fair to assume the OPEC would push to tighten supplies as soon as possible. Some of its members, particularly Venezuela and Iran, say that their national economies are suffering now that oil is well down from summer prices, which ran over $120 for some time.

But, OPEC cannot gets its act together. At its meeting this weekend, plans to cut supplies to increase prices fell off the rails.

According to Reuters, "OPEC on Saturday deferred a decision on a new oil supply cut amid signs that Saudi Arabia and its Gulf allies are demanding tighter adherence to restraints put in place over the past two months."

The fighting within the cartel is remarkably good news for big Western economies, China, and India. Higher oil prices would push regions that are already weak into a deeper recession.

Since oil and gas prices helped slowdown many national economies, it is only fitting that relief could be a keep factor to giving consumers, particularly those in the U.S., a chance to pay their gasoline costs and their mortgages instead of having to pick one or the other.

The OPEC "non-decision" may be the only good economic news this quarter.

Douglas A. McIntyre is an editor at 247wallst.com

Oil got off to a strong start today, climbing over $3 earlier in the session, but the last couple hours have seen the precious crude give back its earlier gains and is now trading down slightly on the day at $80.88, down $0.31.

The early day jump was in reaction to continued optimism that a full blown global recession could be avoided with the infusion of $125 billion by the U.S. government into nine major banks.

Last week at this time, we were pretty much all asking ourselves the question of just how bad are things going to get, and this led to a week-long panic in the market that sent all the major international exchanges into free fall. Now it seems like, for the moment, the panic is behind us and investors are starting to suspect that perhaps things are not going to be as bad as people were beginning to believe last week. We won't be looking at the next Great Depression, or so we hope, but with this market, emotion seems to change in a heartbeat.