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Oil price to top London agenda

Energy ministers from the world's largest oil producers and consumers are likely to agree on the need for stable oil prices and better and more timely data on energy when they gather in London tomorrow.

However, that is probably where the public agreement ends.

The world's most powerful energy players will be attending a meeting first called by UK Prime Minister Gordon Brown at an emergency Jeddah summit in June, when oil prices were spiralling up towards $150 a barrel.

But the world has changed in the last six months.

Opec ministers arrive directly from a meeting in Algeria, which yesterday announced the group's biggest ever oil production cut in an attempt to arrest a collapse in oil prices.

Opec members, Russia and other producers want to halt a fall in the oil market that has plunged more 70% since July. US crude oil is now trading at just over $40 a barrel.

The implosion of the oil market has reduced oil exporters' revenues and left many facing huge budget deficits.

Representatives of the big oil consuming nations are also keen to halt the wild swings in oil prices but few of them are prepared to argue for higher prices, at least in the short-run, as they battle the most severe recession since the 1930s.

"The volatility over the past year has been good for neither producers nor consumers," analyst Simon Wardell at Global Insight told Reuters.

The huge drop in oil prices has been particularly useful for consuming nations in recent weeks as they battle recession, because it acts as a kind of extra tax break, but very low oil prices are not necessarily good for anyone in the long run.

"While consuming countries wouldn't want to talk in terms of suggesting a price band for oil - that would be too much like interference in the market - they probably want prices where their environmental commitments look economically viable," Julian Lee, analyst at the Centre for Global Energy Studies, told the news agency.

"That is somewhere above where oil prices are now - though I don't think many governments would be prepared to admit it."

While the drop in oil prices has been broadly welcomed by the industrialised world, it has distorted governments' climate change agendas, increased economic instability, raised fears of a future supply crunch, and ravaged producers' revenues.

Both consumers and producers worry that very low oil prices will discourage investment in hydrocarbons and alternative, renewable forms of energy.

So while producers and consumers are likely to disagree about where prices should be near-term, they can find common ground in opposing market volatility.

Meanwhile, the European Commission said today it would seek more information from Opec on the group's decision to remove a record 2.2 million barrels per day from oil markets.

"The Commission is going to ask for more details in the framework of our bilateral dialogue on why the decision (was taken) and the impact it is going to have," a spokesman for the European Union executive told a regular briefing.

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