OPEC ministers will on Sunday debate whether their best policy is strict compliance with existing output curbs or a new set of cuts as they balance the issues of bulging oil stocks and a bruised world economy.

Ministers arriving in Vienna have 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).

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

Naimi said the output cuts were reducing oversupply, but demand was expected to stay weak.

You have to understand that the world economy is not as healthy as it should be. We should expect demand world-wide to be down.

OPEC's Ministerial Monitoring Committee, which will make a recommendation to Sunday's full meeting of the Organization of the Petroleum Exporting Countries, was calling for better compliance, a delegate told Reuters.

There was an emphasis on better compliance. This is what is going to be suggested tomorrow, the delegate said on Saturday.

Adding to pressure on OPEC to avoid inflicting further damage on the economy by driving oil prices higher, U.S. President Barack Obama, head of the world's biggest energy consumer, called Saudi King Abdullah on Friday.

But sources said some members of the 12-member producers' club still favored more decisive action to drain inventories and avoid a further slide in the oil price as the fall in economic activity destroys fuel demand.

Algerian Energy and Mines Minister Chakib Khelil has been the only one to say so publicly since arriving in Vienna.

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.


Whatever the outcome of Sunday's meeting, Saudi Arabia, the world's leading exporter and the best-placed to add or subtract barrels of 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.

The cuts since last September are the deepest and most rapid yet and the strong compliance has helped to pull prices up from a low of $32.40 in December to around $46 now -- just over $100 below last year's record high.

But inventories are still brimming. Weak demand, especially heading into the second quarter when fuel consumption is typically at its lowest after the end of the northern hemisphere winter, could lead to further stock builds.

OPEC will be mindful of the price crash in 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 it is predicted to 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, Alex Lawler and Simon Webb, Writing by Barbara Lewis; editing by William Hardy)