Oil falls below $51 as OPEC doesn't cut output

Oil prices fell over 6 percent Monday, to below $51 a barrel, after OPEC decided not to cut production at an informal meeting in Cairo on Saturday and on more evidence the global economic slowdown will hurt demand for crude.

By midday in Europe, light, sweet crude for January delivery was down $3.62 to $50.81 a barrel in electronic trading on the New York Mercantile Exchange. The contract had settled down a penny at $54.43 on Friday.

In London, January Brent crude fell $3.31 to $50.18 on the ICE Futures exchange.

On Saturday, Saudi Oil Minister Ali Naimi said that OPEC will "do what needs to be done" to shore up falling oil prices when the group meets Dec. 17 in Algeria, but for now it was "too early" to make another output cut.

Prices continued to slide despite a separate report by Iranian state TV in which OPEC Secretary-General Abdullah El-Badri said that a daily oil production cut of between 1 million and 1.5 million barrels was likely in December.

OPEC had already made an output cut of 1.5 million barrels a day in October, although analysts said the organization may want to observe the impact of that cut before committing to the another one.

El-Badri was quoted Monday on the station's Web site saying that the Organization of Petroleum Exporting Countries is facing a very difficult situation and plans to "restore oil prices to $90 per barrel."

But disheartening news from some of the world's largest economies pushed aside speculation about any future OPEC cuts.

Surveys of activity in the manufacturing sector in the euro zone and Britain were particularly poor on Monday. Both pointed to a sharper-than-expected contraction in output.

In China, an equivalent survey of its manufacturing sector also made for grim reading, generating fears that one of the main engines of global growth over the last few years is slowing sharply.

Sucden Research in London cited data from the United Nations, which now expects the global economy to grow by just 1 percent in 2009, compared to an earlier forecast expecting growth of 2.5 percent.

Meanwhile, Saudi King Abdullah told the Kuwaiti newspaper Al-Seyassah in an interview published Saturday that oil should be priced at $75 a barrel.

"They need to cut a lot to get the price to $75," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "Demand is disappearing underneath them fast."

Iranian Oil Minister Gholam Hossein Nozari was quoted as saying Sunday that the market was oversupplied by around 2 million barrels per day and that production should be cut by that amount.

OPEC, which accounts for about 40 percent of global supply, reduced output quotas in October by 1.5 million barrels a day.

"It will be difficult to get everyone to comply to a drastic cut," Shum said. "The market has assumed there will be a substantial OPEC cut so if they don't, there will be significant downward pressure on prices."

Investors will be looking this week for signs of how bad the global economic slowdown may be, particularly U.S. retail sales at the start of the holiday shopping season.

In other Nymex trading, gasoline futures fell 5.16 cents to $1.1580 a gallon. Heating oil dropped 5.66 cents to $1.6705 a gallon while natural gas for January delivery shed 12.8 cents to $6.382 per 1,000 cubic feet.

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Associated Press writer Alex Kennedy in Singapore contributed to this report.