A model of a pipeline is seen at the main entrance to the Gomel Transneft oil pumping station, which moves crude through the Druzhba pipeline westwards to Europe, near Mozyr, some 300 km (186.3 miles) southeast of Minsk in this January 9 photo. Oil prices have fallen by US$10 in the past week after reaching US$98 on Novenber 23. - Reuters

Oil plumbed five-week lows below US$88 a barrel on Monday as concerns about the health of the United States economy extended losses that have cut 10 per cent from prices over the past two weeks.

U.S. crude fell 81 cents to US$87.90 a barrel at 1830 GMT, after trading down to US$87.14 earlier, well off the record high of US$99.29 a barrel hit on November 21. Brent crude traded down 12 cents to US$88.14 a barrel.

Output decision

The slide comes as the Organisation of the Petroleum Exporting Countries (OPEC) gathers in Abu Dhabi to decide on output policy.

"The market will be very focused on Wednesday's OPEC meeting, but we believe they are unlikely to do anything," said Mike Wittner of Societe Generale. "They have the same concerns as the market — the possibility of weakening economic growth led by the United States."

Consuming nations have urged OPEC to pump more oil to help temper shrinking inventories ahead of the Northern Hemisphere winter and to stem prices. But OPEC ministers, who agreed this year to hike output by 500,000 barrels per day effective November 1, insist oil's surge to record highs had been driven by speculators and not by a shortfall in supplies.

"There is absolutely ample supply," Ali al-Naimi, Saudi Arabia's influential oil minister, said.

Prices slumped by US$9.47 a barrel last week, the biggest nominal weekly loss ever, on the prospect of an OPEC output increase, U.S. economic fears and a rebound in the U.S. dollar. The weak dollar has contributed to the rise that rocketed oil up about 40 per cent from August to late November, before the U.S. greenback showed signs of bottoming out. On November 23, oil reach a record US$98.14 before falling back.

Failed to reach target

A Reuters poll early last week showed analysts expected another 500,000 bpd increase from OPEC oil's tumble since then may have clouded the picture.

"The price collapse of last week could be seen as a lesser incentive for Saudi Arabia to sponsor a new increase," said Olivier Jakob of oil consultant Petromatrix.

OPEC's November production levels, excluding Iran and Angola, failed to reach the target set in September, when the cartel agreed to increase supplies by 500,000 bpd, a Reuters survey found.

- Reuters