* OPEC expected to cut output at Friday meeting
* Iran says OPEC may need to cut output by 2-2.5 mbpd
(Updates prices)
By Joe Brock and Jane Merriman
LONDON, Oct 21 (Reuters) - Oil fell towards $70 on Tuesday,
pressured by expectations that a global recession will crush
demand for oil, which could limit the impact of any supply cuts
by OPEC.
U.S. light crude for November delivery <CLc1> was down $3.85
at $70.40 a barrel by 1523 GMT, after earlier hitting a session
high of $75.69.
The market hit a record high above $147 in mid-July.
London Brent crude <LCOc1> was $3.56 down at $68.47 a
barrel.
The Organization of the Petroleum Exporting Countries is due
to meet in Vienna on Friday, when the producer group is expected
to reduce output to defend prices.
Iran has said a drop in demand could push OPEC to cut output
by 2-2.5 million barrels per day. []
OPEC is meeting after a 50 percent fall in oil prices in
just three months from a record peak above $147. The sharp drop
partly reflects falls in demand from the United States, the
world's top energy consumer and other industrial countries,
which are suffering the effects of the credit crisis.
"A cut of about 2 million barrels per day will only offset
the amount of U.S. demand that has been lost on a year-over-year
basis," said Edward Meir of broker MF Global.
"This leaves no extra barrels to offset the demand
vaporization that is almost certainly taking place in other
consuming markets," he said.
OPEC could face an intense debate at their meeting on how
much oil they should take off global markets as they balance
their price needs against risks to a fragile world economy.
The International Energy Agency, which advises
industrialised countries, has said an OPEC output cut could
prolong a global economic slowdown. []
OTHER MARKETS
Oil and other commodities have been tracking moves in equity
markets in the past few weeks.
"I think they moved in line with equities yesterday and are
now pulling back, using stock markets as a barometer for
demand," said Christopher Bellew at Bache Commodities.
European shares gave up early gains that had followed a rise
in U.S. stock markets on Monday on hopes of more government aid
to the economy.
U.S. stocks opened lower, weighed down by gloom about the
impact of a U.S. economic slowdown on company profits.
Meir said commodities and equities had become very closely
correlated. "This is a strong relationship that will likely
override other factors in the short-term, including efforts by
OPEC to take control of a market that has slipped away from it
with alarming speed," Meir said.
The U.S. dollar was near 1-1/2 year high versus a basket of
currencies, which put pressure on dollar-denominated
commodities, including oil and gold. <GOL/><USD/>.
U.S. crude oil inventories probably rose 2.3 million barrels
last week, a preliminary Reuters poll showed ahead of the U.S.
government energy data due on Wednesday. []
The poll also showed forecasts for a 100,000-barrel rise in
distillate inventories, which include heating oil and diesel,
and a 2.1 million barrel gain in gasoline supplies.
(Additional reporting by Fayen Wong in Perth; editing by James
Jukwey)
