Opec producers were divided on Monday over whether or not to bow to demands from oil consuming nations for it take steps to rein in runaway crude prices.
The Organisation of the Petroleum Exporting Countries, meeting on Wednesday, is under pressure to cancel or postpone a scheduled supply cut that this month sent US oil prices to a 13-year peak.
Some in Opec admit prices are too high and favour postponing a February deal, agreed in Algiers, to cut crude supplies by four percent from April.
"The Algeria agreement can be reviewed, it is not compulsory," said UAE oil minister Obaid al-Nasseri.
"There are different opinions that will be discussed including postponing implementing the Algeria agreement."
Others blame this year's record speculative investment in oil for inflaming prices and worry that big US hedge funds could soon exit the market, sparking a price slump.
"It's our position that in the second quarter there will be a reduction in demand so we will work for the cut in production to support prices," said Algerian Oil Minister Chakib Khelil.
"There is plenty of oil out there," said Saudi Oil Minister Ali Naimi. "Do you think we determine the price? Speculators will do whatever speculators do to make money."
Opec's February decision to cut production by a million barrels a day from April 1 sent US crude this month racing above $38 a barrel, the highest closing price since the 1990-1991 Gulf crisis.
But crude fell $2.35 a barrel last week as investment funds pocketed some profits.
It eased another 28 cents to $35.45 a barrel on Monday, a move read by some Opec delegates as hardening chances the group will stick to planned curbs.
Nasseri said there was no talk of completely cancelling the April cut and many delegates said the best consumers might expect is a one-month delay.
"Ministers will seek a balance between engineering a soft landing for oil prices and guarding against a more precipitous fall," said analyst Paul Horsnell of Barclays Capital.
US PETRO-DIPLOMACY: Opec's biggest customer the United States fears the cartel's impressive record of market management is posing a growing threat to economic recovery.
US gasoline retailing at $1.77 a gallon is a political burden to the Bush administration in an election year, though only a third of the average cost at the pump across the European Union.
Washington last week ditched its softly-softly approach to Opec, announcing publicly that it was trying to convince the cartel to ease open the taps.
US investment bank Goldman Sachs released a report estimating the oil price surge may subtract 0.3 percent this year from the gross domestic product of the world's seven biggest economies.
"The impact of higher oil prices may have been masked so far by the boost to real incomes from US tax cuts - but as these fade in the second half, the impact of continued high prices is likely to come to the fore," the report said.
Some in Opec are worried that slower seasonal second quarter demand is already allowing world oil inventories to build more rapidly than it would like.
US crude stocks last week recorded a strong 7.5-million-barrel build, lifting inventories 12 million barrels, four percent, above year-ago levels.
So far Opec has pushed through only a fraction of its planned April reduction. A Reuters survey found cartel members between them had informed buyers of cuts totalling only 335,000 bpd of the million barrels daily agreed.
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