Opec unlikely to agree to production cut now

Cairo: Opec ministers said on Friday they were likely to defer a decision on their third output cut until next month, despite an accelerating slump in fuel demand that has slashed the price of oil by two-thirds since July.

Caught off-guard by a severe decline in energy consumption in the West, Opec is wary of being seen to panic after two previous rounds of cuts failed to shore up prices.

Ministers arriving for today's meeting said they were likely to defer a decision on new cuts until they meet again in Algeria, when they can better judge if all members have met previous commitments.

"It's a consultative meeting. We will prepare some more information and make a final decision maybe in Algeria," said Iranian Oil Minister Gulam Hussain Nozari.

Prior to the meeting Venezuela, Iran and Iraq were calling for more aggressive restraints but by yesterday only Iraq wanted an immediate cut.

"We support a production cut ... we support a reduction now," said Iraqi Oil Minister Hussain Shahristani.

UAE Energy Minister Mohammad Bin Dha'en Al Hamili said he believed the oil market was oversupplied, but declined to give any comment on whether Opec might agree to cut production.

Powerless so far to prop up prices, delegates say Opec is worried that another quick cut could undermine its credibility among traders focused on the spread of the financial crisis into the real economy and its impact on oil demand and inventories.

US crude traded at around $54 a barrel on Friday having set a record $147-a-barrel high in the summer.

"Things have unravelled incredibly quickly on a macro-economic level and this has directly translated into lower oil demand," said analyst Roger Diwan of PFC Energy.

"Opec appears to be serious about maintaining market balance but demand is declining, there is very little appetite for their oil and that is reflected in increasing storage," he added.