Oil prices could have collapsed to much lower levels if Organisation of Petroleum Exporting Countries (Opec) had not decided to slash its crude output, an Abu Dhabi official said yesterday.

Saif Al Ghafli, General Manager of the government-controlled Abu Dhabi Gas Liquefaction Company (ADGAS), said the cut of 1.5 million barrels per day by the Opec was needed to stop a rapid fall in crude prices due to slackening demand caused by the global financial crisis.

"The cut was necessary. Given the continual fall in prices, one can imagine how low it could have gone if action had not been taken," Al Ghafli was quoted as saying by the Oxford Business Group (OBG).

Despite Opec's decision to trim output by nearly five per cent of its production ceiling from November 1, crude prices have continued to weaken and dipped below $60 a barrel this week, their lowest in nearly 17 months.

The prices have tumbled by more than 50 per cent since their historic peak of $150 a barrel three months ago and experts believe they could remain weak because of an expected slowdown in global demand and increasing concerns that the US and other Western economies are heading into recession.

On Monday, West Texas Intermediate (WTI) crude fell $1.23 cents to $62.92 a barrel and London Brent crude closed at $59.02. Between July 2008 and yesterday, Arabian Light Crude has almost halved in value.

According to Opec, lower production levels are required to bring stability to the oil market and stop prices from sliding further. However, the move failed to arrest the price decline.

"Markets voted down the cut," Nazem Fawwaz Al Kudsi, Chief Executive of Abu Dhabi Investment Company, told OBG.

Although traders were not instantaneously impressed by the cut, inaction on Opec's behalf could have resulted in a worse situation."

In separate comments, OBG said the oil price plunge to current levels would not affect Abu Dhabi on the grounds it has based its budget on $40-$50 a barrel and the emirate controls massive overseas assets.

"The Abu Dhabi boom began when oil prices were still relatively low. And the really high prices, ranging around $140 per barrel, were based on speculation. The government knows prices go up and down and based their development plan on lower prices. Thanks to this strategy Abu Dhabi is very stable," it quoted Abdulla Al Hamed, Chief Executive of Capital Group, as saying.

"Indeed, officials used an estimated price of $45-$50 a barrel in the 2008 budget. This means that, with a current account surplus amounting to 25 per cent of the gross domestic product, Abu Dhabi has ample room for manoeuvre and sufficient liquidity reserves to balance its national budget."