* January contract down, February still above $40
* Front U.S. futures contract touches 4-1/2-year low
* Saudi Arabia pledges output cut from January
(Recasts, updates prices, changes dateline from previous
LONDON)
By Edward McAllister
NEW YORK, Dec 19 (Reuters) - Oil fell further on Friday, as
fears of economic slowdown weighed heavier than proposed
production cuts by the world's major oil exporters.
U.S. light crude for January delivery <CLc1>, which was due
to expire later on Friday, fell 77 cents to $35.45 a barrel by
12:34 EST (1734 GMT). It earlier fell to $33.44, its lowest
since April 2004.
The more active February contract <CLG9>, however, was up
73 cents to $42.40, with cuts in OPEC production expected to
take hold in that month.
London Brent crude <LCOc1> gained 79 cents to $44.15.
Oil prices have fallen more than $100 from their peak above
$147 in July as a global economic downturn cuts into
consumption of fuel, and looked set for one of their biggest
weekly declines for years.
Pledges by the Organization of the Petroleum Exporting
Countries (OPEC) to cut output by 2.2 million barrels per day
(bpd) -- the largest ever reduction by the producer group --
failed to support January prices.
"The market is signaling that it is taking a look at the
OPEC cut and recognizing that is more likely to be evident in
February," said Gene McGillian, analyst at Tradition Energy in
Stamford, Connecticut.
"The Feb contract has not been able to crack $40 yet, but
if inventories and refinery use continue to drop then pressure
will resume," he added.
However, many traders doubt OPEC, whose third production
cut since September has brought its total reduction to more
than 4 million bpd or 5 percent of world supply, will fully
implement the agreed cuts.
"We believe that full implementation of the cuts is
unlikely," Goldman Sachs analysts said in a note to clients.
OPEC kingpin Saudi Arabia's Oil Minister Ali al-Naimi,
speaking in London on Friday, said the kingdom would be pumping
less oil in January and would be at its new output target in
line with the group's latest cut.
"BITE THE BULLET"
That reassurance appeared to be having some impact on the
market in late European trade on Friday.
"From a credibility standpoint, OPEC has no choice but to
bite the bullet for the next few months," said Jonathan
Kornafel, Asia Director of Hudson Capital Energy.
"Until traders see a sustained drop-off in the rate of
demand destruction, the market will have a hard time
establishing a floor."
OPEC President Chakib Khelil said on Friday he believed oil
prices had found a floor around current levels. []
"I don't believe there is any reason for it to fall any
further. I don't see it going lower," he told Reuters in
London.
(Additional reporting by Robert Gibbons in New York,
Christopher Johnson in London; editing by Marguerita Choy)
