* OPEC looks set to cut 2 million barrels per day
* Economic woes dim demand outlook
* Weaker dollar supports
(Updates prices, adds comment)
By Christopher Johnson
LONDON, Dec 17 (Reuters) - Oil rose by more than a dollar to
nearly $45 on Wednesday ahead of an OPEC meeting in Algeria
widely expected to announce a big cut in production in an
attempt to halt a collapse in oil prices.
A tumbling U.S. dollar after a bigger-than-expected cut in
interest rates by the U.S. Federal Reserve also helped oil.
Oil ministers from the Organization of the Petroleum
Exporting Countries appeared to be near consensus on a cut in
output of 2 million barrels per day (bpd), the biggest
reduction ever by the producer group. []
U.S. light crude for January delivery <CLc1>, due to expire
on Friday, rose $1.10 to $44.70 a barrel by 1000 GMT after
having fallen to a low of $42.56 in the previous session, just
off a four-year trough of $40.50 a barrel hit on Dec. 5.
London Brent crude for February delivery <LCOc1> was up
$1.30 at $47.95.
Oil prices have tumbled more than $100 from the July
all-time record above $147 a barrel as financial turmoil has
slowed global economic growth and hit fuel demand.
OPEC is desperate to halt the slide in prices. Economists
say that at $40 per barrel, 11 of OPEC's 12 members, as well as
Russia and Mexico, face budget deficits.
But a large cut has been widely flagged by oil ministers and
dealers say the move has already been priced into the market.
EXTRA SUPPORT
"A 2.0 million bpd cut in production now runs the risk of a
'Buy the rumour Sell the fact' scenario," Rob Laughlin, analyst
at MF Global said. "It would have been bullish for the market a
week ago. But we have been warned to expect it now so I think
the market will go up initially but then come down further."
Analysts said any extra support OPEC could get from
non-members would help support oil prices.
Russia, the world's largest non-OPEC producer, has sent a
high-level delegation to observe the meeting. Its deputy Prime
Minister Igor Sechin, said Russia could cut oil exports by as
much as 320,000 bpd but told Reuters cooperation with OPEC would
progress only 'step by step.'
Azerbaijan said it could also support any OPEC decision.
But Mexico, which supported OPEC cuts in 1999 and 2001, said
it would not cut as its output was declining. []
"If OPEC can bring someone else in with a sizeable reduction
then I think that may begin to have more of an impact," said
Simon Wardell, analyst at Global Insight. "If Russia announces
something substantial, I think it will have more of an effect on
sentiment than if OPEC has to go it alone."
In its monthly oil market report, OPEC said on Tuesday the
first drop in world oil demand in 25 years would sharply lower
the need for OPEC crude in 2009, opening the door for a
substantial production cut at its meeting.
For a breakdown on how the expected cut may look, click on
[]
OPEC has already agreed to cut output by 2 million bpd at
two previous meetings, but demand has fallen faster and stocks
of oil are building up. OPEC said 45 million barrels of crude
oil are currently being stored at sea on oil tankers.
Crude oil stocks in top energy consumer the United States
are running near the top of their five-year range and
forecasters expect data to show they rose by another 300,000
barrels last week, according to a Reuters poll ahead of the U.S.
fuel inventory report due later in the session. []
(Additional reporting by Annika Breidthardt in Singapore;
editing by James Jukwey)
