Oil Prices Dip After OPEC Shifts Quotas : Energy: Traders view the cartel’s latest cuts as too limited to end a world glut. The price of crude takes its biggest drop in a year in New York.

Oil prices plummeted worldwide Tuesday in reaction to OPEC production cuts seen as too slight to reduce a glut of crude on the market.

On Monday, a U.S. holiday, prices began falling on Asian futures markets, then continued to drop when European markets opened.

In trading Tuesday on the New York Mercantile Exchange, crude oil futures for March delivery fell $1.34 from Friday’s close to $18.12. Gasoline and heating oil prices also fell.

It was the largest one-day change in crude prices in more than a year.

“This is a very obvious first reaction” to last week’s meeting of the Organization of Petroleum Exporting Countries, said oil analyst Joseph Stanislaw, managing director of Boston-based Cambridge Energy Research Associates.

The industry expected steeper production cuts by OPEC, he said, but instead saw evidence of deep divisions over production rates at the Geneva meeting.

“There’s no total commitment (to significant cuts), and this does not bolster confidence in the market,” said Stanislaw. “The only hope left for the market was OPEC, and OPEC let it down.”

Confidence was shaken in large part by the actions of Saudi Arabia, the cartel’s largest producer. While Iran and other oil states wanted deeper production cuts to boost prices, Saudi Arabia insisted on retaining the bigger share of OPEC production that it assumed when Kuwait and Iraq stopped producing during the Persian Gulf War.

At the contentious meetings, Saudi representatives only reluctantly agreed to a quota for the country of fewer than 8 million barrels a day--the minimum considered essential to force equivalent cuts by the rest of the cartel.

But when the Saudi envoys called home for confirmation of their agreement to cut production to roughly 7.9 million barrels a day, Saudi King Fahd overruled them--saying, reportedly, “the strongest will win.”

“It raises the question of whether anyone is going to adhere to the agreement, if the Saudis have already said they won’t stick to theirs,” said Morris Greenberg, an economist with WEFA Group, an economic forecasting and consulting group in Bala Cynwyd, Pa.

U.S. refiners did not welcome the shallow production cuts, either.

Normally, a lag develops between falling prices of crude oil and lower gasoline prices at the pump. But the weak U.S. gasoline market--notably in Southern California--has forced some U.S. refiners to sell gasoline at unprofitable prices, according to William D. Hermann, chief economist for Chevron Corp.

Refiners such as San Francisco-based Chevron are turning higher-priced crude into lower-priced gasoline, Hermann said, “and that’s not a recipe for making a lot of money.”

The American Automobile Assn. reported a 0.4 cent-per-gallon increase to $1.049 in the national average price of self-serve regular unleaded gasoline, after 12 weeks of falling prices. Hermann dismissed the slight increase as a meaningless “blip.”

Meanwhile, OPEC has scheduled another meeting April 24 in Vienna. “Those discouraged about the agreement can have some hope that they can fix it,” said William Liscom, publisher of the industry newsletter OPEC Listener.