LONDON, Jan 15: Oil futures slumped by almost $3 on Tuesday after US President George W. Bush urged producers to take action over “very high” prices and as US recession fears gathered pace, traders said.

Bush’s comments prompted his Saudi hosts to vow to increase oil output when justified by the market.

Crude prices had soared to $100 per barrel at the start of the year, piling pressure on the US economy, which has become a key issue in the campaign for the November presidential election.

On Tuesday, New York’s main contract, light sweet crude for delivery in February, plunged $2.81 to $91.39 per barrel in floor trading.

London’s Brent North Sea crude for February shed $2.29 to $90.63 in electronic deals.

President Bush urged oil producers on Tuesday to take action over near record-high prices, broaching a sensitive topic on the second day of talks with Opec kingpin Saudi Arabia.

With fears of recession looming large in the United States, Bush said he would speak to Saudi Arabia’s King Abdullah “about the fact that oil prices are very high, which is tough on our economy.”

“And that I would hope, as Opec considers different production levels, that they understand that if ... one of their biggest consumers’ economy suffers, it will mean less purchases, less oil and gas sold.”

He raised the issue at a meeting of Saudi entrepreneurs a day after his administration said it was taking the first steps in a multi-billion-dollar arms deal with Saudi Arabia, a key US ally in the volatile region.

Oil industry experts said the comments from Bush were a “significant” development.

“It’s a significant statement because it’s President Bush talking to Saudis and so you have the world biggest producer and the biggest consumer talking to each other,” said Societe Generale analyst Mike Wittner in London.

He said the Saudis wanted to strike a balance between high oil prices and steady economic growth.

“On one hand, they (Saudi Arabia) want to maximise revenues but at the same time, in order to sell oil, they need healthy demand and healthy demand depends on a healthy economy ... so they cannot push prices too high.”

The Organisation of Petroleum Exporting Countries (OPEC) is due to meet in Vienna on February 1 amid pressure to calm prices after shrugging off calls to increase output at its last meeting in December.

Responding to Bush, Saudi Arabia’s Oil Minister Ali al-Nuaimi said: “We will raise production when the market justifies it, this is our policy.”

Opec insists that high oil prices are being driven by speculative buying and that increasing supplies would not have an impact on the market price.

“I don’t think that Opec will increase production at the next meeting,” Wittner said.

“They are very careful about adding more supply to a market where demand is already uncertain.”

Crude had jumped higher on Monday amid tensions in key crude producers Iran and Nigeria that had offset concerns that US oil demand could decline amid economic uncertainty, traders said. However, Bank of Ireland analyst Paul Harris cautioned: “(The) prospects for the US economy will play a part in capping the upside.”

Harris said geopolitical concerns in key crude producers Iran and Nigeria should continue to help underpin oil prices.—AFP