The White House today criticised Opec's move to cut its oil production by 1.5 million barrels per day 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," White House spokesman Tony Fratto said.
The White House declined to speculate on what effect Opec's production cut would have on the US economy, which accounts for about one out of every four barrels of oil consumed in the world each day.
The Bush administration has been concerned about high oil prices, which have contributed to a slowing US economy. At the same time, the administration has said Opec's crude supplies are needed to rebuild global oil inventories.
Oil slid nearly $5 a barrel today as gloom about a global economic downturn that is sapping fuel demand took the steam out of the Opec agreement to cut output.
Ministers of the Organization of the Petroleum Exporting Countries agreed at an emergency meeting in Vienna to take 1.5 million barrels a day of crude, about 5 per cent of its supply, off the world market.
US light crude for December delivery traded down $4.80 at $63.04 a barrel. Earlier it touched $62.85, its lowest since May 2007.
It has fallen $42 a barrel in a month. London Brent crude was down $4.42 at $61.50.
Saudia Arabia's Oil Minister Ali al-Naimi said the group had agreed the output reduction with effect from November 1st.
Traders said Opec's action might not be enough to arrest a slide that has seen oil down more than 50 per cent from a record $147 a barrel in July.
"Already we've seen demand destruction of 2 million barrels per day. I'm not convinced this cut will be enough to stop the slide." said Rob Laughlin, at broker MF Global.
"We need to see what they plan on doing later this year."
Oil has plunged as the credit crisis hits economic growth and oil demand in the United States, the world's biggest energy consumer, and other industrial countries.
"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 in a note.
"However, we believe production cuts will not rescue the oil price," he said. "We target WTI (U.S.) crude oil prices hitting $50 a barrel next year."
Reuters