OPEC set to continue oil output restraint

VIENNA, Mar 15 (Reuters) OPEC is ready to keep existing oil output curbs when it meets on Thursday, delegates said, but the group is wary recent falls in U.S. equities markets could presage a slowdown in the world's top energy consumer.

Stocks wobbled again on Wednesday as concerns over the impact of U.S. home owners falling behind with mortgage payments hit financial shares. Europe's FTSEurofirst fell 2.6 percent.

U.S. stocks erased an early dip on the Dow index to end higher.

Crude oil seesawed around a barrel, touching its lowest since mid-February at one point and ending up one cent.

Nigerian Oil Minister Edmund Daukoru, speaking after a meeting of OPEC's advisory panel, said the risks to oil were to the downside amid mounting evidence of slowing economic growth.

''The market is bearish. There are a number of signs. Oil stock levels are high,'' Daukoru told reporters as he left the meeting of OPEC's Ministerial Monitoring Committee.

It will advise OPEC's full ministerial meeting on Thursday to keep current output restrictions in place, despite a call from the International Energy Agency for increased exports.

Oil ministers from OPEC's core Gulf oil producers backed that stance at separate talks on Wednesday evening.

''The global economy is slowing down. China is cooling off, India is cooling off, even the U.S. that is the engine. If you put all the factors together including non-OPEC growth it is bearish so we are looking to implement the full cuts.'' Daukoru was referring to supply curbs totally 1.7 million barrels per day, roughly six percent of supplies, agreed at the group's last two meetings in October and December.

Analysts estimate OPEC, that pumps over a third of the world's oil, has made good one million bpd of the pledged reductions. OPEC puts the figure closer to 1.2 million bpd.

Iranian Oil Minister Kazem Vaziri-Hamaneh, who also sits on the advisory panel, said OPEC was concerned by market instability that could hurt energy investment. He said the panel would recommend OPEC meet again in June to review the situation.

''There are downside risks from high interest rates, the weak dollar and the U.S. housing market and loan problems. We need to be vigilant,'' an OPEC official said.

TOO MUCH RESTRAINT? The International Energy Agency and some analysts believe OPEC may have gone too far with its supply curbs.

According to the IEA, adviser to 26 industrialised countries, OECD countries could be headed for the largest first quarter drop in oil stocks for over 10 years.

''OPEC may have had the impression that the market was oversupplied, but that is no longer the case. In fact we see it as rather undersupplied,'' IEA Executive Director Claude Mandil told Reuters on the sidelines of a conference in London.

''I think they should soon consider an increase in output.'' Even the most conservative projection, OPEC's own, puts demand for OPEC oil at above 30 million bpd this year. That number includes Iraq and new member Angola, both of which are exempt from output restrictions for the time being.

The 10 OPEC members subject to restrictions currently have an output target of 25.8 million bpd.

''We will watch the market and take further action if needed - that could mean tighter compliance, further cuts or if demand remains robust an increase in supply,'' an OPEC official said.

The oil price is well down on its July 2006 peak of .40, but is still almost three times the level at the start of 2002 when Asian demand ignited. OPEC says prices must be sufficiently high to encourage investment without choking economic growth.

The organization scrupulously avoids setting a price target but some ministers have said they believe is a reasonable level for U.S. oil. Others set the bar higher.

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