Saudi-led attempts to rig the oil market today failed dismally as the price of crude continued to plunge on fears of a slump in worldwide demand.

Opec, the cartel of producers responsible for about 40% of the world's output, with a third of that coming from Saudi Arabia, today said it would cut production by about 1.5 million barrels a day, a drop of around 5%.

The plan is to protect the oil producers' own revenues and arrest the sharp decline in the crude price, which has more than halved from a peak of over $147 a barrel in early July.
“The decision was straightforward,” said Saudi oil minister Ali al-Naimi.

However, the announcement of the cut after a two-hour meeting of leaders of Opec — the Organisation of Petroleum Exporting Countries — in Vienna failed to arrest further sharp falls in crude prices.

Oil was down $3.98 at $63.86 in New York while London Brent crude dived more than 6%, off $3.37 at $62.55.

Rob Laughlin, an oil analyst at MF Global, said two million barrels a day of consumption has already been removed from the contracting global economy, and added: “I'm not convinced this will be enough to stop the slide.”

Opec was openly criticised by Chancellor Alistair Darling, who wants falling oil prices to feed through to lower petrol and power prices in the UK, to help slow the escalating cost of living.
Speaking ahead of the cut, Darling said: “The fact that oil prices have halved in recent weeks has been beneficial — if they go down that route, it will be disappointing.”

The International Energy Agency said the move was “unhelpful” for economies for facing recession. But the Opec cut is unlikely to be the last, with industry analysts suggesting further production curbs in the coming weeks. Al-Naimi said: “We're prepared to meet more often to stabilise the market.”

Opec president Chakib Khelil, the Algerian energy minister, said: “If a further decision has to be made, it will be made, and we will not necessarily wait for the [next] meeting [in December].”

Khelil dismissed the failure of the cut to reverse the decline in the oil price, saying it was too early to have had an effect.

Analysts said oil is testing resistance levels of $62-$63 a barrel, below which further big falls may follow.

Traders had been expecting a cut of a million barrels, and there was talk the larger-than-predicted Opec reduction spooked a market already reeling from recessionary news around the world and from the rise in the dollar.