Oil prices drop on OPEC warning

Oil prices fell Wednesday as Algerian energy minister and former OPEC president Chakib Khelil told AFP that the market would continue sliding if the cartel refrained from cutting output this weekend.

Traders were meanwhile gearing up for the release of key data on energy stockpiles in key consumer the United States.

In London, Brent North Sea crude for delivery in April fell 64 cents to 43.32 dollars a barrel.

New York's main futures contract, light sweet crude for April, dropped 92 cents to 44.79 dollars.

Ministers of the Organization of Petroleum Exporting Countries (OPEC), the cartel that pumps about 40 percent of world crude, meet Sunday in Vienna to discuss whether to slash output in a bid to shore up prices.

"If nothing is done, prices will fall in the second quarter," Khelil said, adding that the market remained oversupplied ahead of OPEC's gathering.

Khelil said he believed the "majority" of OPEC's 12 member nations backed a reduction in production that would help to support prices and in turn their incomes.

Elsewhere, the US Department of Energy (DoE) on Wednesday is to release its latest weekly update on energy inventories in the United States, the world's biggest oil consuming nation.

"We would certainly pay close attention to crude stocks and refinery runs, following a sharp rise in (US) refinery capacity" in last week's data, VTB Capital analyst Andrey Kryuchenkov said.

"There is a slim chance for a small (fall) in crude inventories, provided runs remain near the same levels as the previous week."

Even though US refineries are working harder, DoE data released on Tuesday projected average annual world oil consumption will decline by almost 1.4 million barrels per day in 2009.

OPEC, which pumps about 40 percent of world crude, had agreed late last year to reduce output by 4.2 million barrels a day as oil prices plunged from record highs of more than 147 dollars a barrel in July with the economic crisis hurting demand.

"Right now the message out of OPEC is mixed," said Victor Shum, senior principal at energy consultancy Purvin and Gertz in Singapore.

"I think what is likely to happen is that there will be a lot of comments to stick to full compliance (with) output cuts that have been planned and there will not be further cuts," he told AFP.

"At the time they meet, if pricing is really below 40 dollars, that will give OPEC more reason to cut output," Shum added.

Some analysts said the market still believed that the OPEC cartel had not done enough to check falling prices.

"As we approach the March OPEC meeting, crude oil markets appear to be in much better balance than the last time OPEC met and this is due in no small part to the excellent compliance by OPEC members with the lower quotas agreed at the December meeting," said Nic Brown of Natixis.

"Does this mean that OPEC has done enough? We suspect not," Brown added. (AFP)