United States President George W Bush expressed alarm on Tuesday 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 the Organisation of Petroleum Exporting Countries (Opec), decided to cut supplies to the global economy by up to 10%.
The Bush administration is concerned that higher fuel prices will eat into disposable incomes, raise business costs and add to a $500-billion trade deficit that is undermining the dollar.
Opec defended its decision to clamp down on existing quota-busting and to cut production targets. It believes 1,5-million barrels a day are leaking into the global market as a result of some countries producing more than allowed under the present regime.
Saudi Arabia believes the move was needed to prevent the price from plummeting as demand slackens in the West with the end of winter.
Oil prices have been under pressure recently, 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.
After the news broke, Brent crude for March delivery was up US64c at $29,75 a barrel. — Â