Opec Cut Puts Us Economy at Risk, Says White House

President Bush expressed alarm last night after oil cartel Opec threatened to undermine his chances of a second term in the White House by announcing a surprise cut in production from April.

The price of crude jumped sharply on futures markets after Opec, at a meeting in Algiers, decided to cut supplies to the global economy by up to 10%.

With Mr Bush already facing a strong challenge from the Democrats over his handling of the economy, the unexpected news brought an immediate riposte.

"It is our hope that producers do not take actions that undermine the American economy and American workers - and American consumers for that matter," said White House spokesman Trent Duffy.

The Bush administration is concerned that higher fuel prices will eat into disposable incomes, raise business costs and add to a $500bn (£267bn) annual trade deficit that is already undermining the dollar.

Opec defended its decision not only to clamp down on existing quota-busting by its 11 members but to cut production targets from April onwards. It believes 1.5m barrels a day are leaking into the global market as a result of some countries producing more than allowed under the present regime, and that a further 1m barrels should be removed.

Saudi Arabia, the world's biggest oil producer, said the move was needed to prevent the price from plummeting as demand slackens in the west with the end of winter. "The inventory, where it is now, is fine. We don't want to see it building. We don't want to see a precipitous fall in prices", Saudi oil minister Ali al-Naimi said.

Oil prices have been under pressure in recent weeks, down almost $4 a barrel since January 20. With the US government announcing rising stocks of crude, Opec made its move to prevent a further fall.

Nevertheless, with oil still trading above the top end of Opec's band of $22-$28 a barrel, analysts had not expected action to cut supplies. Last night, after the news broke, Brent crude for March delivery was up 64 cents at $29.75 a barrel.

"It's a clever move by Opec, giving the market support before the second quarter," according to Oystein Berentsen at Norway's Statoil. "But given the amount they are leaking, people will want to see how much of the cut they implement. There is a question mark over their credibility."