A major supply glut at storage facilities across the nation have rendered OPEC’s largest ever production useless for the time being.

The price of crude oil dipped briefly below $36 in New York for the first time since June 2004 as declining demand is causing a swelling in supplies which offset the largest ever OPEC production cut announced yesterday.

Crude oil options traders on the floor of the New York Mercantile Exchange.

The January U.S. crude oil contract which expires on Friday, tumbled $3.84, or 9.59 percent, to settle at $36.22.

Traders seem to be largely ignoring the OPEC cut of 2.2 million barrels, which is an overall reduction of 4.2 million barrels since September, at least for the time being.

J.P. Morgan drastically reduced their oil price forecast for 2009 from $69 a barrel to $43 barrel because of “the ongoing deterioration in the world economic environment and the ensuing sharp contraction in global oil demand in both 2008 and 2009.”

The International Energy Agency (IEA) said that OPEC can’t have control on the market right now with traders fixated on falling demand due to the global recession.

“The price is not going higher because the market has expected the (OPEC cut) number,” the IEA’s Executive Director Nobuo Tanaka told Reuters. “The global economy is getting worse, so the market is responding to this.”

The U.S. Energy Information Administration (EIA) released a report which revealed that demand had dropped 4.9 percent in the U.S. during the past 4 weeks.

Inventory data released in the report also showed that crude stockpiles at the key Cushing, Oklahoma delivery point for the New York Mercantile Exchange contract rose by 4.7 million barrels.

World oil consumption next year will drop by 0.2 percent to 85.68 million barrels a day, OPEC said in a Dec. 15 report.

Oil prices have fallen 75% since their record level above $147 a barrel in July.

OPEC, which controls 40% of the world’s oil, is scheduled to meet next on March 15 in Vienna. But many analysts see a possibility for an earlier meeting if oil prices continue to slide.