Oil falls below $54 ahead of OPEC meeting

Oil prices fell below $54 a barrel Friday as a gloomy outlook for global crude demand overshadowed expectations that OPEC might announce a production cut this weekend.

By midday in Europe, light, sweet crude for January delivery was down 88 cents to $53.56 a barrel in electronic trading on the New York Mercantile Exchange. Trading was closed Thursday in the U.S. for the Thanksgiving holiday.

In London, January Brent crude fell 28 cents to $52.85 on the ICE Futures exchange.

Oil prices have fluctuated between $50 and $55 this week, pausing after a fall of over 60 percent since reaching a record $147.27 in mid-July.

Grim economic data this week pointing to a severe recession in the U.S. in the fourth quarter and signs of growth slowing around the world have kept prices from rebounding further.

``The drop-off in demand is going to continue,'' said Jonathan Kornafel, Asia director at market maker Hudson Capital Energy in Singapore. ``There's no reason for the market to rally.''

Oil will likely trade below $50 a barrel and could test the $40 level by the end of the year, Kornafel said.

Investors will be watching whether the Organization of Petroleum Exporting Countries reduces output quotas at an informal meeting Saturday in Cairo. Venezuelan Oil Minister Rafael Ramirez on Wednesday called on OPEC to cut production by 1 million barrels a day.

OPEC Secretary-General Abdullah al-Badri on Thursday said the group should not panic in the face of falling oil prices. Russia also indicated this week it may join OPEC in lowering output.

``I don't expect a cut out of the Cairo meeting, but I do expect a 1.5 million barrel cut at their December meeting,'' Kornafel said. ``I wouldn't be surprised to see Russia get in with OPEC either.''

Analyst Olivier Jakob of Petromatrix in Switzerland said he was ``neutral'' about the possibility of a decision in Cairo to cut output.

``OPEC has this time around done an excellent job of not letting the market price a meeting before its start,'' Jakob said in a research note. ``They have downplayed the outcome of the meeting and pushed the cut expectations to December but the size of the latest U.S. stockbuild now provides the potential for a surprise.''

For the week ended Nov. 21, crude stocks jumped by 7.3 million barrels, the U.S. Energy Department said Wednesday. Analysts had expected a boost of only 400,000 barrels. Gasoline inventories rose by 1.9 million barrels, against estimates of a rise of 300,000 barrels

In other Nymex trading, gasoline futures were down 0.48 cent to $1.1734 a gallon. Heating oil dropped 3.27 cents to $1.7040 a gallon while natural gas for January delivery slid 14.7 cents to $6.731 per 1,000 cubic feet.