World oil prices have continued to fall, undermining oil cartel Opec’s efforts to steady prices by cutting output by 1.5 million barrels a day.

The decision to cut about 5% of the cartel’s total daily output came after an emergency Opec meeting in Vienna.

The move did not halt the sliding oil price with US sweet, light crude down $3.69 at $64.15 after wild swings saw greater falls in earlier trade.

Recession fears have pulled oil down from a high of $147 a barrel in July.

The sell-off also hit London Brent, down $4.40 at $61.52.

Dramatic collapse

In a statement after the meeting, Opec said it had cut output because supply outpaced demand, and prices had collapsed dramatically in recent weeks.

“There’s not going to be any impact on inflation, there’s not going to be any impact on growth” OPEC President Chakib Khelil

UK supermarkets in petrol price war

The cut will take effect from 1 November.

The 13-nation producers group, responsible for producing about 40% of the world’s total supply, said it would continue to provide the market with the crude oil volumes required by consumers.

Analysts had expected Opec to cut output by at least one million barrels a day and some producers – such as Venezuela and Iran – wanted greater cuts.

More cuts?

OPEC President Chakib Khelil said because Opec members produce about 300,000 barrels a day more than the official quota of close to 29 million barrels, the total reduction by the end of the year would be about 1.8 million barrels a day.

Mr Khelil rejected the suggestion that the decision would hurt the global economy.

“There’s not going to be any impact on inflation, there’s not going to be any impact on growth.”

Opec oil ministers said that they would review their decision at their next meeting in December, leaving open the possibility of further cuts beforehand if necessary.

Revenue worries

Observers said that the failure of oil prices to climb suggested that Opec was losing its power.

“The power to influence oil prices is moving farther and farther away from Opec,” said oil analyst Stephen Schork.

“Everyone thought China and India would go on buying oil forever, but that’s not the case. The demand is no longer there. People fooled themselves when they said emerging markets could weather a US downturn.”

Ahead of the meeting, some of the cartel’s members called for a reduction in output to stop the fall in prices: Venezuela wanted production to be cut by a million barrels a day, while Iran had called for a cut twice that size.

The two countries are thought to be most in need of a relatively high oil price – around $100 a barrel – to finance government spending, says the BBC’s economics correspondent, Andrew Walker.

Iran relies almost entirely on its oil exports for government revenue: for every dollar off the price of a barrel of oil, the country loses roughly $1bn a year in revenue.

But British Prime Minister Gordon Brown warned that any reduction made in a bid to push up oil prices would be “scandalous” at a time when major economies were close to tipping into recession.

Motorists benefit

Oil prices hit an all-time high of $147 a barrel in July, but have since fallen back steadily.

Prices now stand at levels not seen since last spring, amid fears a global economic recession will cut demand.

The price that motorists have been paying for petrol at forecourts has been falling recently.

A price war has broken out among leading UK supermarkets with Asda, Sainsbury’s, Tesco and Morrisons all announcing cheaper petrol on Friday.

But some observers believe moves to reduce production could reverse that trend.

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Oil prices have fallen further amid concerns that a slowdown in the global economy will dent demand.

US light, sweet crude fell $4.56 to settle at $91.15 a barrel in New York while Brent crude was down $5.02 to settle at $89.22 in London.

Oil prices fell $5 a barrel on Monday as global stock markets sank and news emerged that US refineries had not been damaged as expected by Hurricane Ike.

The oil price has fallen from highs of above $147 a barrel in July.

“If the economic turmoil continues, demand will continue to drop,” said Jonathan Kornafel, of options trader Hudson Capital Energy.

“It’s a bit of panic in the markets,” he added.

Market worries

Oil prices continued to fall despite reports of an attack on a Royal Dutch Shell pipeline in Nigeria.

A key market concern on Tuesday was the future of insurance giant AIG, which some feared could be the next financial giant to fold.

“AIG has more to do with the oil price right now than the Saudis do,” said Larry Grace, an analyst with Kim Eng Securities.

If more firms go bust, there are fears that gaining credit will be even harder, hitting both large firms and individuals.

If this happens then consumers are likely to seek ways to tighten their belts more, such as reducing their petrol consumption.

News reported by The BBC

Opec has told its members to strictly limit their production to agreed quotas as Brent crude dipped below $100 a barrel for the first time since April.

After talks in Vienna, Opec president Chakib Khelil said the measures to curb over-production amounted to a cut of 520,000 barrels a day within 40 days.

North Sea Brent fell $4.54 to $99.04 on Tuesday before rising to $100.34, while US Brent fell $3.08 to end on $103.26.

Prices have sunk from a record of more than $147 a barrel seen in July.

The price has since fallen by nearly 30% as a global economic slowdown has reduced demand for oil.

Supply has also been increased in recent months by some Opec members – principally Saudi Arabia.

Meanwhile, Indonesia has said suspended its membership of Opec.

“The conference regretfully accepted the wish of Indonesia to suspend its full membership in the organisation and recorded its hope the country would be in a position to rejoin the organisation in the not too distant future,” Opec said in a statement.

Compromise

After the late-night talks in Vienna, the group announced it had decided to “strictly” comply to the production ceilings agreed in September last year, which amount to 28.8m barrels a day excluding Indonesia and Iraq.

It linked the falling price of oil to falling economic growth, a stronger US dollar, easing geo-political tensions and greater supply.

Supply has also been increased in recent months by some Opec members

“All the foregoing indicates a shift in market sentiment causing downside risks to the global oil market outlook,” a statement said.

The effect of the measures, according to Algerian Oil Minister Chakib Khelil, who chaired the meeting, will be a cut of about 520,000 barrels a day.

“Actions [to curb output] will be taken by members as soon as they can, that means in the next 40 days,” he said.

Opec members will re-assess the situation when the meet again at the end of the year.

The BBC’s Bethany Bell in the Austrian capital says the move is a compromise meant to avoid new turmoil in the oil markets, but it also reflects Opec’s attempts to stop the recent falls in global prices.

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Brent crude has fallen below $100 a barrel for the first time since April, as traders predict Opec will stick to current output levels.

With Opec now meeting in Vienna to discuss forthcoming production, Saudi Arabia has already hinted that it sees no need for a cut.

Brent ended Tuesday trading down $4.14 to $99.30 a barrel, while US crude settled down $3.08 to $103.26.

Prices have sunk from a record of more than $147 a barrel seen in July.

Before the meeting, the Venezuelan energy minister said he would support keeping production levels unchanged.

“We need to keep things as they are,” said Rafael Ramirez.

Growing demand

Earlier, the Saudi oil minister Ai al-Nuaimi said: “The market is fairly well balanced.”

“Inventories are in a healthy position, everything is in balance.”

OPEC members including Kuwait and the United Arab Emirates, have called for no change in output levels though Algeria, Iran, Venezuela and Libya have suggested a cut is needed – claiming the market is oversupplied.

Opec is currently thought to be producing about a million barrels per day (bpd) more than its official ceiling of 29.67 million bpd.

In May and June Saudi Arabia agreed to increase production by 500,000 bpd to help calm markets.

Opec produces about 40% of world crude.

In July, the exporters’ group said world demand for oil would grow by 50% between now and 2030 as people in developing countries drive more cars.

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The US and the four largest economies in Asia are to voice “serious concerns” over “unprecedented” oil prices.

Energy ministers are meeting in Japan a day after a record one-day jump in the crude oil price, to $139 a barrel.

Under pressure from the US, Japan, China, India and South Korea have agreed on the need to end fuel subsidies, blamed for boosting demand.

But correspondents say there are major differences over the speed and extent to which the changes should be made.

The soaring cost of oil is causing growing strain to economies around the world, with some governments facing protests and other pressures from consumers and businesses.

Both the Indian and Malaysian governments have recently raised fuel prices in order to cut the subsidies they provide.

Officials and ministers from the Group of Eight (G8) key industrialised nations, as well as China, India and South Korea, are meeting for two days in the northern city of Aomori.

In a statement to be issued after the talks, the US and Asian countries are expected to say rising oil prices pose a great burden, especially on developing countries and are “against the interest of both consuming and producing countries”, news agencies reported.

It will also say that “phased and gradual” withdrawal of price subsidies – blamed by some for fuelling demand in emerging economies – is “desirable”, the French news agency AFP said.

But India insisted there was no agreement to remove the subsidies altogether, China made clear it had no time frame for moving towards lower subsidies, and Japan’s trade minister confirmed they had agreed only on the need to remove the subsidies, according to the BBC’s Chris Hogg, in Tokyo.

‘Economic egotism’

Friday’s spike in oil prices coincided with a dollar slump, plummeting share prices on Wall Street and US unemployment suffering its biggest rise in 20 years.

“Russia is a global player. We understand our responsibility for the fate of the world and want to participate in forming the rules of the game” Dmitry Medvedev, Russian president

On Saturday, US energy secretary Samuel Bodman said the price surge was a “shock” but not a crisis, amid fears the oil price spike could help tip some of the world’s economies into recession.

He also said he did not see a need for a tightening of regulation of oil markets.

Some say market speculation, and a lack of disclosure of information over the size and nature of reserves, may be stoking the price rises, as well as concerns that demand may be growing faster than supply.

Separately, Russian President Dmitry Medvedev blamed what he termed the US’s “economic egotism” for the current problems in the global economy.

He accused the US of “aggressive financial policies” and said most people in the world had become poorer.

Speaking at the St Petersburg International Economic Forum, he said Russia was a “global player” and wished to “participate in forming new rules of the game”, but not because of “imperial ambitions”.

Iran threat

On Friday light crude set a record high of $139.12 in after-hours trading on the New York Mercantile Exchange after hitting $138.54 at the regular session.

Oil prices were given a boost on a report by Morgan Stanley analyst Ole Slorer, who suggested the price of oil could rocket to $150 as early as July.

Some analysts have suggested that prices would reach as high as $200 a barrel during the next 18 months.

The benchmark light, sweet crude oil is more than twice the price it was a year ago.

On Friday, the market was also responding to a statement by Israel’s transport minister that an attack on Iran was “unavoidable” after sanctions to prevent Tehran from developing its nuclear capability had failed.

Investors hedging oil against the weak dollar has also pushed up the price of oil.

Correspondents say fears that workers at Chevron Corporation in Nigeria may go on strike and subsequently disrupt production and access to oil are also adding to market jitters, as well as Israeli threats to strike Iran over its nuclear programme.

Oil prices had recorded losses earlier this week after doubts about future demand took hold of the market.

News reported by BBC