* U.S. Fed cuts target for overnight interest
rates
* Economic troubles dim demand outlook
* OPEC near consensus on 2 million barrels a day cut
(Updates with Fed decision, prices, adds analyst quote)
NEW YORK, Dec 16 (Reuters) - Oil prices fell more than 3
percent on Tuesday as lingering worries about shrinking global
energy demand countered expectations OPEC will agree to deepen
supply cuts and a move by the U.S. Federal reserve to cut
interest rates.
Oil ministers from the Organization of the Petroleum
Exporting Countries will meet in Algeria on Wednesday, with
many members calling for output cuts of up to 2 million barrels
per day (bpd). []
Russian officials said the top non-OPEC producer could
reduce 320,000 bpd to give greater punch to the cartel's
efforts. []
U.S. crude <CLc1> traded down $1.46 to $43.05 a barrel at
2:39 p.m. EST (1939 GMT). London Brent crude <LCOc1> fell 10
cents to $44.50.
The U.S. Federal Reserve cut its target for overnight
interest rates to zero to 0.25 percent, bringing it closer to
unconventional action to lift the economy out of a year-long
recession. []
"The fact that the Fed cut rates by 75 basis points rather
than the consensus of 50 points seems to indicate that perhaps
the economy needs major, major overhaul that is bigger than
expected earlier," said Nauman Barakat, senior vice president
at Macquarie Futures USA.
"That translates into lower demand for crude oil."
Oil prices are drifting just above a four-year trough of
$40.50 a barrel hit on Dec. 5 and remain down more than $100
from the July record above $147 a barrel as a financial crisis
hits fuel consumption.
The market slump has raised alarm bells for OPEC nations
and other big producer countries that depend on revenues from
energy exports.
"OPEC won't face a bigger decision than this for some time
to come," Bank of Ireland analyst Paul Harris said.
"If they don't put a floor under prices with a cut of some
significance then it could have huge ramifications for the
future of the oil market," he added.
The producer group expects global demand for its crude oil
to fall by an average of 1.4 million bpd next year due to the
downturn in the world economy. The drop in demand will be even
more dramatic in the first quarter.
"In the first quarter of 2009, the demand for OPEC crude is
expected to see a sharp drop of 2.3 million bpd from the same
quarter in the previous year," it said in its latest monthly
report on the oil market. []
OPEC already has agreed to cut output by 2 million barrels
a day at two previous meetings. But demand has fallen faster
and as a result, stocks of oil are building up.
OPEC said 45 million barrels of crude oil are currently
being stored at sea on oil tankers.
Crude oil stocks in top energy consumer the United States
are running near the top of the five-year range and forecasters
expect data to show they rose by another 300,000 barrels last
week, according to a Reuters' poll ahead of the U.S. fuel
inventory report due on Wednesday. []
(Reporting by Richard Valdmanis and Matthew Robinson in New
York, Ikuko Kao and Jane Merriman in London and Annika
Breidthardt in Singapore; Editing by Christian Wiessner)
