By Barbara Lewis and William Maclean
ORAN, Algeria (Reuters) - OPEC ministers could make their deepest oil supply cut ever when they meet on Wednesday to combat shrinking demand, bulging stocks and a $100 collapse in prices.
For many in the Organization of the Petroleum Exporting Countries, up to 2 million barrels per day (bpd) must be removed to keep up with a slump in consumption that has knocked two-thirds off prices since July.
"We have to act -- we see a very sizeable reduction," OPEC Secretary-General Abdullah al-Badri told reporters on his arrival on Monday in this western Algerian city.
OPEC President Chakib Khelil agreed.
"Everybody is supporting a cut -- I don't have any doubt about it."
Benchmark U.S. crude rose more than $3 a barrel in early trade to top $50 -- still far from the "fair" price of $75 a barrel identified by Saudi Arabia, the world's biggest crude exporter, at the end of November.
After slashing a combined two million barrels daily, 7.3 percent of its output at two previous meetings, OPEC was on course to chop production by at least another five percent.
Saudi Arabia, had yet to make public comment on its position, but OPEC chief Khelil said Riyadh had already cut back in anticipation of further supply curbs.
"The Saudis have already taken a decision ahead of the meeting, as you know, they have reduced their supply to the market by 8 percent, which has had an effect on the market," Khelil, also Algeria's energy minister, told reporters.
Reuters reported last week that Saudi Arabia's biggest customers would receive less oil in January -- implying the kingdom had already factored in another OPEC reduction.
PRICE Defense
Top priority for the group that pumps more than a third of the world's oil is building a floor under prices, which sank toward $40 early this month.
OPEC hopes to prove wrong the banks which foresee oil's descent to $30 or below in the first quarter of next year.
Iran, OPEC's second biggest producer, said it will propose a cut of up to 2 million bpd in Oran. Economists say Tehran needs oil near $80 to avoid a spending squeeze in next year's budget.
OPEC president Khelil said it would take more than half a year to remove oversupply if OPEC were to cut by 2 million bpd.
"I think 2009 will be a very difficult year," said Khelil. "We are very pessimistic about demand."
Equally gloomy is the U.S. government which expects global oil consumption to shrink this year and next -- the first time since the 1980s demand had contracted for two years running.
Oil use has now fallen in the world's top three oil consuming nations -- the United States, China and Japan. [ID:nSP412689] About 86 million barrels of oil are burned worldwide each day.
OPEC is also hoping for support from exporters outside the group.
"We did not ask anyone else to cut but I hope they will act and help the market," said Badri.
In the past, any collaboration has been unconvincing. Non-OPEC output is stagnating because of aging fields and underinvestment, and any declared cuts could merely mask the decline.
But the depth of the price fall has shaken all producers. Russia, the biggest non-OPEC exporter, is sending its energy minister and its deputy prime minister to the Oran meeting.
The head of Russian oil company LUKOIL
In 2001 OPEC cut by 5 million bpd in four stages, 19 percent of its supply, laying the foundation for a six-year boom in oil prices that culminated this summer in a record $147.27 a barrel.
OPEC's biggest cut by volume was in April 1999 when it reduced production by 1.716 million bpd, according to Reuters data.
(Additional reporting by Simon Webb in Oran and Vladimir Soldatkin in Moscow, writing by Peg Mackey, editing by William Hardy)
