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UPDATE ON OPEC MEET ON DECEMBER 17

Saudi Arabia opened the door for OPEC's most dramatic

output reduction since the 1970s, calling for the group to

slash world oil supplies by at least another two million barrels

a day to keep abreast of faltering demand.

Saudi Oil Minister Ali Naimi, arriving for a summit here

of the Organization of Petroleum Exporting Countries, said

a cut of that size was the only way for OPEC, which supplies

more than 40% of the world's oil, "to bring things into balance."

View Full Imagendov Ali Al-Naimi, Saudi Arabia's oil minister,

arrives at his hotel prior to an OPEC meeting in Oran, Algeria.


Combined with an earlier reduction, the cuts would total nearly

four million barrels a day in four months -- the cartel's largest

yet in such a short time. But implementing another round of

deep cuts could prove difficult for OPEC, which is already

feeling the financial squeeze from falling prices and diminished


oil exports.
Traders on the New York Mercantile Exchange seemed

unimpressed by the Saudi show of resolve. The price of U.S.
\
benchmark crude for January delivery, already down more

than 70% from its record high this summer, fell 2%, or

91 cents, to $43.60.OPEC has trimmed output by around

1.7 million barrels a day since August, when oil prices began

to plummet on the heels of the global financial crisis and

sharply weaker energy demand. Together, the cuts would

represent 4.3% of current world demand of 85.8 million

barrels a day.

As always, much of the burden of another cut would fall on Saudi

Arabia, the world's largest oil exporter. Mr. Naimi, normally

tight-lipped in advance of big OPEC summits, clearly wanted to

send a signal to the oil market that Saudi Arabia was serious

about curtailing excess supply and buttressing prices. But his

announcement came on a day when the U.S. released another

round of grim economic data, including a steep drop in housing

starts, illustrating how difficult it will be for the cartel to

impress a market captivated by pessimistic economic tidings

on all sides.

OPEC, which meets officially on Wednesday, is eager to win

support for production cuts among big non-OPEC producers

such as Russia and Azerbaijan, both of which have sent

delegations to this week's summit.

Russian officials are expected to show solidarity with OPEC,

but the country's oil fields are already declining amid limited

investment and aging infrastructure. Few analysts believe

Moscow will offer cuts beyond the 300,000 barrels a day

Russia is expected to lose in pumping capacity next year.