OPEC ministers in Vienna this weekend will debate whether the best policy is strict compliance with existing curbs or a new set of output cuts as they balance the issues of bulging oil stocks and a bruised world economy.

Ministers arriving ahead of Sunday's talks have said the first item on the agenda is tighter compliance with agreements since September to lower supply targets by 4.2 million barrels per day (bpd).

So far the Organization of the Petroleum Exporting Countries has delivered about 80 percent of the cuts and it is estimated that 100 percent compliance would remove a further million bpd.

We need to discuss how to drain inventories. We need to evaluate demand and see if it is necessary to take additional measures, Venezuelan Minister of Energy and Petroleum Rafael Ramirez told reporters.

We have to analyze very carefully the economic situation world-wide ... It is worse than anybody thought it would be. We have a bad situation with demand, demand is destroyed.

Venezuela in the past has been among the first to ask for action to push up the oil price.

OPEC's biggest and most influential member Saudi Arabia has yet to comment publicly.

Sources said the kingdom, which has delivered the largest share of cuts so far, has emphasized the need for better output discipline from other members of the group.

Most OPEC members agree that ... compliance with current (output) reductions will have a better ... impact on price stability than new production cuts, Saudi Arabian newspaper al-Riyadh newspaper reported on Saturday, citing OPEC sources.

Reducing production may send the wrong signals to the global market that will not be in the interest of investors in hydrocarbon resources and will not support the recovery of the global economy, the sources added.

HISTORIC CUTS

The cuts since last September are the deepest and most rapid yet and the rate of compliance is historically high.

They have helped to pull prices up from a low of $32.40 in December to around $46 now for U.S. crude -- a level that is just over $100 below last year's record high.

But inventories are still brimming and weak demand, especially heading into the second quarter when fuel consumption is typically at its lowest following the end of the northern hemisphere winter, could lead to further stock builds.

Washington-based PFC Energy said in a weekend briefing note OPEC's most likely course of action would be a new cut in formal targets.

OPEC will be mindful of the price crash in the late 1990s when oil fell toward $10 a barrel.

OPEC cuts then were implemented more slowly than this time round and prices did not stabilize for more than a year.

A difference between then and now is that fuel demand was only flat. This time it is predicted to decline by at least one million barrels per day this year compared with 2008 and the world economy is far weaker.

Consumers have called for OPEC restraint and argued cheaper oil amounts to an economic stimulus.

By contrast, OPEC has argued the best way to shore up economic growth is with stable oil supplies, which it says depend on high enough prices to guarantee investment in new production.

Venezuela's Ramirez said on Friday OPEC had talked of $70 a barrel as a possible floor the group would seek for oil prices.

But Kuwaiti Oil Minister Sheikh Ahmad al-Abdullah al-Sabah told state news agency KUNA agency in Vienna that target would be hard to achieve at the moment because of the global financial crisis and its impact on demand.

For related graphic, showing the relationship between OPEC output cuts and the oil price, please click on:

https://customers.reuters.com/d/graphics/OL_OPEV0309.gif

(For a factbox on past OPEC production changes)

(Additional reporting by David Sheppard, Henrique Almeida, Alex Lawler and Simon Webb, Writing by Barbara Lewis; editing by William Hardy)

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