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Oil falls despite production cuts Oil falls despite production cuts
(about 1 hour later)
World oil prices have fallen further, undermining producers' cartel Opec's efforts to steady prices by cutting 1.5 million barrels a day from output. World oil prices have fallen further, 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 decision to cut about 5% of the cartel's total daily output came after an emergency Opec meeting in Vienna.
But the move did not halt the sliding oil price, with US sweet light crude dropping more than $3 to $64.75. London Brent fell a similar amount.But the move did not halt the sliding oil price, with US sweet light crude dropping more than $3 to $64.75. London Brent fell a similar amount.
Recession fears have pulled oil down from a high of $147 a barrel in July.Recession fears have pulled oil down from a high of $147 a barrel in July.
The cut in output will take effect from 1 November. Dramatic collapse
Analysts had expected Opec to cut output by at least one million barrels a day. In a statement after the meeting, Opec said it had cut output because supply outpaced demand, and prices had collapsed dramatically in recent weeks.
In a statement after the emergency meeting in Vienna, Opec said the action had been taken because supply of oil was way ahead of 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 class="" href="/1/hi/business/7688324.stm">UK supermarkets in petrol price war
The 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. The cut will take effect from 1 November.
More cuts possible 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.
OPEC President Chakib Khelil rejected the suggestion that the decision would worsen the global financial crisis. 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.""There's not going to be any impact on inflation, there's not going to be any impact on growth."
Ahead of the meeting, 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.
The meeting, originally planned for November, was brought forward because of growing concerns about the impact of the financial crisis on the oil market.
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 June, amid fears a global economic recession will cut demand.
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.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.
Greater cuts?
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.