NEW YORK (Reuters) - Oil dropped nearly $4 a barrel on Friday as concerns about a global recession and slowing fuel demand took the steam out of an OPEC agreement to cut output.

The Organization of the Petroleum Exporting Countries agreed at an emergency meeting in Vienna to take 1.5 million barrels a day of crude, about 5 percent of its supply, off the world market. Saudia Arabia’s Oil Minister Ali al-Naimi said the reduction would take effect from November1.

U.S. light crude for December delivery settled $3.69 weaker at $64.15 a barrel, after falling as low as $62.65, its lowest since May 2007.

It has fallen more than $40 a barrel in a month.

London Brent crude settled down $3.87 at $62.05.

Traders said OPEC’s action might not be enough to arrest oil’s slide of more than 56 percent from a record $147 a barrel in July. Drops in motor fuel demand amid the economic downturn have been dramatic.

“Already we’ve seen demand destruction of 2 million barrels per day. I’m not convinced this cut will be enough to stop the slide,” said Rob Laughlin, at broker MF Global.

Signs of a sharp slowdown in Europe and a barrage of profit warnings and job cut announcements from companies around the world intensified fears of deep global recession.

The U.S. Energy Information Administration said this week that oil products demand in the world’s biggest energy consumer during the previous four weeks was 18.7 million barrels per day, down 8.5 percent from a year ago.

Meanwhile, the U.S. Transportation Department said motorists drove 15 billion miles (24 billion km) less in August than they did a year earlier for the biggest decline in any month ever recorded.

NERVOUS MARKETS

Oil has plunged as the credit crisis hit economic growth and fuel demand in the United States and other industrial countries.

“We believe this week will mark the start of a new quota reduction cycle by OPEC and it will continue through 2009,” Deutsche Bank analyst Michael Lewis said in a note.

United Arab Emirates' Energy Minister Mohamed bin Dhaen al-Hamli (L) and Qatar's Energy Minister Abdullah bin Hamad al-Attiyah arrive at the OPEC headquarters for an extraordinary OPEC meeting in Vienna, October 24, 2008. REUTERS/Herwig Prammer

“However, we believe production cuts will not rescue the oil price,” he said. The bank expects U.S. crude oil prices will hit $50 a barrel next year.

The International Energy Agency, which advises industrialized consumer countries, was critical of OPEC’s cut.

“It’s not a helpful decision because markets are quite nervous,” Eduardo Lopez, senior analyst at the IEA’s oil market division said.

U.S. stocks tumbled and European shares had their lowest close in 5-1/2 years, continuing a global collapse in equities as investors fearing a long and deep worldwide recession cashed out of risky assets.

“OPEC actions notwithstanding, the market is clearly being influenced more by the apocalyptic psychology currently pervading all markets,” said Mike Fitzpatrick, vice president at MF Global in New York.

Gold pared losses after sliding 5 percent in early trade, as the dollar retreated from highs against the euro and investors took advantage of lower prices to buy into the metal.