Opec fears oil price crash but US urges caution on production cuts

Opec's secretary-general, Ali Rodriguez, warned yesterday of an "unimaginable" oil price crash next year unless producers cut output significantly, but the US government said substantial reductions could damage the world economy.

The Opec move came as an apparent policy split over oil opened up between the US and Europe. The European Union's top energy policy official, commissioner Loyola de Palacio, will meet Mr Rodriguez next week to urge Opec to cut production to maintain stable oil prices. A commission spokesman said it was worried that if prices remain as low as they are now ­ at about $19 a barrel yesterday ­ it could hit investment in oil exploration.

However, the US energy secretary, Spencer Abraham, urged producers to consider the failing health of the world economy when deciding on production and prices.

Mr Abraham was returning from a visit to Moscow for talks on energy policy. Some analysts believe the US is putting pressure on Russia not to bow to Opec's demands to join the cartel in making large-scale output reductions.

Mr Abraham said he believed market forces should be allowed to set world oil prices. "If you don't have a growing world economy it hurts producers and non-producers alike," he added.