OPEC ministers began talks on Sunday to decide whether to set new output targets or stick to existing curbs against a backdrop of swelling oil inventories and a shattered world economy.

Ministers from the 12-member Organization of the Petroleum Exporting Countries said the first item on the agenda was tighter enforcement of agreements since September to lower supply targets by 4.2 million barrels per day (bpd).

But they have yet to rule out also agreeing deeper cuts to stave off further price weakness and pre-empt more rises in inventories as demand sinks.

It could go either way, OPEC Secretary General Abdullah al-Badri told reporters on Sunday when asked which course of action ministers favored.

Consumer nations have put pressure on the group to avoid pushing oil sharply higher, which could inhibit any economic recovery.

The International Energy Agency, which represents consumer countries, has said cheaper oil amounted to a trillion-dollar financial stimulus and Barack Obama, president of the world's biggest energy consumer the United States, called Saudi King Abdullah last week.

On arriving in Vienna, Saudi Arabian Oil Minister Ali al-Naimi threw the emphasis on output discipline.

Compliance is very good, Naimi told reporters. We'd like to see compliance as high as possible. It is over 80 percent now, it can be better.

He also said the current oil price of around $46 a barrel was not enough to sustain new production and echoed comment by King Abdullah last year that a reasonable price was about $75.

It's what we have said before. If you want the marginal producers to produce, all the poor guys that are shutting down their wells now, they need something about $70-$75. Everybody would be happy, Naimi said just before Sunday's meeting began around 6:30 EDT.


Algerian Energy and Mines Minister Chakib Khelil has been the most forthright in stating further action was needed.

Asked whether OPEC should cut or just comply with existing restrictions, Khelil replied: Both ... comply and cut.

He said the oil market had already factored in another reduction of at least 500,000 bpd, with the implication prices would fall if that does not happen.

Some analysts have also said OPEC would risk price weakness if it kept current targets.

If there is a time to implement a new cut, it is now and not when the market would be back to $35 a barrel, said Olivier Jakob of Petromatrix.

If OPEC cuts now it is keeping the upper hand, if it sticks to compliance then it is leaving the upper hand to the market.

Whatever Sunday's meeting decides, Saudi Arabia, the world's leading exporter and the best-placed to add or subtract oil, could decide unilaterally how much it thinks the market needs.

Independent observers have said the kingdom was already pumping less than its implied target.

OPEC's cuts since last September have helped to pull prices up from a low of $32.40 in December.

But levels are still just over $100 below last year's record high of nearly $150 and the group cannot forget the price crash of the late 1990s when oil fell toward $10 a barrel.

Output cuts then were implemented more slowly than this time round and prices did not stabilize for more than a year.

A difference between then and now is that fuel demand was only flat. This time, the energy sector's leading forecasters have predicted it will decline by at least one million bpd in 2009 compared with 2008 and the world economy is far weaker.

Another difference is that non-OPEC supplies are falling because of under-investment and the maturity of many oilfields.

That means any cooperation from non-OPEC countries with OPEC output cuts would be largely academic.

Some OPEC ministers have nevertheless called on the leading non-OPEC producer Russia to join in.

Moscow has sent a high-level delegation, including Deputy Prime Minister Igor Sechin and Energy Minister Sergei Shmatko, to attend Sunday's meeting as an observer .

(Additional reporting by David Sheppard, Henrique Almeida and Karin Strohecker, Writing by Barbara Lewis; editing by William Hardy)