LONDON, Dec 16: World oil prices plunged more than $3 on Tuesday after Opec revealed the likely size of its output cut this week before recovering later in the day to trade little changed from Monday.

In late trading, light sweet crude for delivery in January stood at $44.46 a barrel, down five cents from Monday’s close on the New York Mercantile Exchange (NYMEX).

On London’s InterContinental Exchange (ICE), Brent North Sea crude for January was 43 cents higher at $45.03 a barrel.

“There will be a cut of about two million barrels,” Saudi Oil Minister Ali al-Nuaimi said on arriving in Oran, Algeria for an Opec ministerial meeting where members were forecast to cut output to prevent fresh price falls.“Supply is still somewhat in excess” of demand. “Inventories are also higher than normal. To bring things in balance there will be a cut of about two million barrels,” he told reporters.

Following the comments, crude dived from $46.30 in London and $46.52 in New York, to low points of $43.90 and $43.59 respectively.

“Clearly the market had discounted the 2 million barrels already, and they considered it to be not enough,” said Tradition Energy analyst Addison Armstrong, cited by Dow Jones Newswires.

“Personally, I thought they’d do more like 2.5 million” barrels a day, he added.

Cartel kingpin Saudi Arabia is by far the biggest producer in the 13-nation Organisation of Petroleum Exporting Countries (Opec) that pumps 40 per cent of world oil supplies.

Opec has also appealed to non-member Russia to help it stabilise prices and it was not clear if the two-million-barrel cut envisaged by Nuaimi included a Russian output reduction. Saudi Arabia rivals Russia as the world’s largest oil producer.

Since July, prices have plunged by as much as 70 per cent from record highs above $147 a barrel.

Crude futures had briefly bounced above $50 per barrel in New York on Monday for the first time in two weeks, but then retreated as traders pondered a likely Opec output cut and ongoing economic turmoil.

Opec officials acknowledge that they are in a tight spot

as crude prices dwindle in the face of a global economic downturn that has sapped demand for energy in the industrialised world.

Several Opec members heavily dependent on oil exports, notably Nigeria, Ecuador and Venezuela, are being squeezed financially as oil prices have plummeted this year.

At the same time, the cartel risks dampening global demand if it cuts supplies because many energy consuming nations are already grappling with recession and need less oil.—AFP