Page last updated at 18:42 GMT, Monday, 15 December 2008

Oil falls despite Opec's threats

Algerian workers prepare an inflatable welcome banner
Opec is preparing to make what could be its biggest production cut

Oil prices briefly topped $50 a barrel on Monday before dropping almost $5 a barrel, despite threats of production cuts from oil producers' cartel Opec.

Opec is meeting in Oran in Algeria, having delayed a production decision at an informal meeting earlier this month.

Some members are keen to cut production by two million barrels per day to boost prices, which have slumped from a peak of $147 a barrel in July.

US light, sweet crude for January delivery fell $1.18 to trade at $45.10.

The price had earlier peaked at $50.05 a barrel.

In London, Brent crude for January fell 60 cents to $45.81.

Opec's biggest previous cut in production was in April 1999 when it cut production by 1,716,000 barrels per day (bpd).

'Sizeable reduction'

Prices are being depressed by falling demand for oil as the world's major economies slow and some of them go into recession.

There were further signs of economic weakness on Monday, with the news that Toyota would indefinitely delay a new assembly plant in Mississippi as a result of the US car industry downturn.

Opec cut 1.5 million bpd at its last formal meeting in Vienna, Austria, in October, but prices continued falling regardless, and hit a four-year low of $40.50 a barrel on 5 December.

"We have to act - we see a very sizeable reduction," Opec secretary-general Abdullah al-Badri told reporters.

Two million barrels represents about 5% of Opec production.

"Everybody is supporting a cut - I don't have any doubt about it," said Opec president Chakib Khelil.

Mr Khelil also confirmed that Opec's biggest exporter, Saudi Arabia, had already cut its own production by 8% in anticipation of the cartel's decision.

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