OPEC to meet, may steer away from oil output cut

ABUJA, Dec 14 (Reuters) OPEC meets on Thursday to set oil output policy through winter, under pressure from importing nations to steer away from a further cut that risks pushing up prices and damaging economic growth.

The group that pumps over a third of the world's oil has already reduced production once this year -- by 1.2 million barrels per day, or four percent, in October to halt a 10-week, 25 percent slump in the oil price.

As recently as last week there was little doubt a further cut would follow in Abuja. But with oil above and consumer nations on edge, the mood appears to have shifted.

''I don't think there will be any cut,'' the head of Libya's delegation, Shokri Ghanem, told Reuters on Wednesday.

OPEC ministers agree the market is oversupplied -- stocks in top consumer the United States are the highest since 1998 for the time of year -- but some say now, during peak winter demand, is the wrong time to cut.

The meeting will consider at least three options, delegates said. The first, which is gaining support, is to ensure full adherence to October's deal and meet again in January.

The second involves a modest, some say meaningless, 300,000 bpd cut from January. The third is for a cut of between 300,000 bpd and one million bpd from February, as the northern hemisphere emerges from winter.

The opinion of leading exporter Saudi Arabia is key.

Oil Minister Ali Al-Naimi has said the market is in better shape now than when ministers last met.

''The fundamentals of the market are much better than they were in October,'' he said, adding: ''We probably have a little work to do to make it an even better, more stable market.'' U.S. Energy Secretary Sam Bodman and International Energy Agency head Claude Mandil have called on OPEC to wait until next year before deciding on further supply reductions.

Some ministers agree there is a case for holding fire.

OPEC research director Hasan Qabazard said if members abide by the deal they struck in October, that should restore equilibrium. OPEC has delivered almost two thirds of the 1.2 million bpd reduction so far, according to Reuters estimates.

The IEA, adviser to 26 industrialised countries, said in its monthly report on Wednesday OPEC cuts from Nov. 1 were making themselves felt, ''cold comfort for a risk-prone global economy already facing another winter with high oil prices''.

OPEC delegates said Algeria, Iran, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates were among those who favoured stricter compliance and no change to OPEC's 26.3 million bpd production target.

Oil has fallen from a mid-July peak of .40 but is still three times the price at the start of 2002 as Asian demand kicked in.

Refining constraints and worries over supply from Iraq, Nigeria, Iran and Russia helped fuel the rally.

Venezuela, with a costly social spending programme under President Hugo Chavez, is among those pressing for a cut.

''I would imagine it will be hard for OPEC to do anything,'' said independent oil analyst Geoff Pyne. ''Although it's true oil stocks are high in absolute terms, they certainly seem to be being drawn down quickly.I think when the ministers look at the IEA report it is very hard to make further cuts.'' The OPEC meeting is due to start at 0900 GMT with ministers going into closed session at 1200 GMT. It is during this session that they are expected to strike a deal.

REUTERS PKS RS1306