RIYADH, Oct 25: The tsunami--that began with the credit crunch in the US housing market-- is now getting furious. After having sent tremors through the global banking and financial sectors it is now out to derail the energy markets.

“The oil bubble has well and truly burst,” claims the London-based Centre for Global Energy Studies (CGES), hurrying the Opec into action and rightly so.

Even a more than anticipated 1.5 million bpd cut in oil output by the Opec producers’ group failed to halt the slide in the price of crude. The markets continued to tumble. If prices keep falling, Opec’s President Chakib Khelil said the cartel would “definitely” reduce its production again in coming months, either when it meets in Algeria in December.

Opec meetings have often been contentious, daylong affairs with fierce debate within the grouping. However, for a change, it did not take the cartel long to arrive at the consensus at Vienna on Friday.

The mood at the Opec headquarters was grim and every one realised they had to do something, before the market is awash with crude. Thus the members agreed on the 1.5-million-barrel reduction with little argument. The cut amounts to about 5 per cent of Opec’s output and nearly 2 per cent of global consumption.

Officially, Opec remains committed to meet all the global needs. However, as per Opec’s claim, the exporters were having trouble locating buyers for their crude. Some countries say their normally reliable customers could not obtain letters of credit to finance their purchases because of the financial crisis.

“This slowdown in oil demand is serving to exacerbate the situation in a market, which has been oversupplied with crude for some time,” Opec said in its statement. “Moreover, forecasts indicate that the fall in demand will deepen.”

Even the Saudis, who argued for keeping the markets well-supplied at the last Opec meeting, seemed to have been struck by the speed of the price drop. The 1.5 million bpd output cut was a sort of compromise between the hawks and doves within the organisation.

Some reports claim that some hard line members of the organisation, such as Iran and Venezuela, wanted a cut of up to 3 million barrels in a bid to stop the continuing fall in oil prices. However, others, including Saudi Arabia, feared that higher prices will be self-defeating and only reduce demand from the major consuming nations in Europe and America.

And then the organisation is also endeavouring to rope in the non-Opec producers into some sort of understanding on the output issue. In a rare appeal Opec called on other oil-producing countries to “contribute to efforts to restore prices to reasonable levels, and eliminate harmful and unnecessary fluctuations.” OPEC’s members control 40 per cent of the world’s oil exports.

So far, no sign has emerged that independent producers like Norway and Mexico, which have cooperated with Opec in the past, when prices had collapsed, are ready to step in with production cuts. But this week just before the meeting, the Opec president visited Russia, the world’s second-biggest oil producer, to discuss ways of cooperation.

In recent weeks Moscow has been sending signals of greater cooperation with Opec on oil market issues. Analysts said the production cut would not arrest the price fall and that demand for oil was likely to continue. “Already we’ve seen cut in demand of 2m barrels per day. I’m not convinced this cut will be enough to stop the slide,” said Rob Laughlin, a broker at MF Global.

With recession round the corner, the global crude demand has nosedived. Prospects of an economic turnaround are minimal. Demand is slipping fast.

Global consumption may show a full year contraction in 2008, for the first time in 15 years.