Vienna - When the Organization of the Petroleum Exporting Countries (OPEC) meets in Vienna on Friday, the cartel is expected to cut production as a reaction to falling demand.

But analysts said that a small cut would have little effect on oil prices, while a bigger reduction of output would spell lower revenues for countries whose government expenditures depend on oil income, such as Iran or Venezuela.

The global financial crisis and lower demand predictions caused the basket price of crude oil produced by the 13 OPEC members to drop by about 10 dollars last week.

The prompted the group's oil ministers to meet three weeks earlier than scheduled to discuss the market situation.

OPEC President and Algerian Energy Minister Chakib Khelil said the cartel was set to lower output by between 1.5 million and 2 million barrels (159 litres each) per day. Present production is 28.8 million.

Iranian Oil Minister Gholam-Hossein Nozari said a decrease of 2 to 2.5 million barrels would be a suitable option taken by OPEC members, who produce about 40 per cent of the world's oil.

He considered the current oil prices as not compatible with the market situation and predicted that a production decrease could boost the prices to over 150 dollars per barrel.

Together with Libya and Venezuela, Iran is one of the hawks among OPEC countries when it comes to prices.

These countries depend on an oil price of around 70 dollars per barrel to finance their budgets, as they have been expanding government spending programmes, said Karsten Fritz, a commodity analyst with Commerzbank in Frankfurt.

On Tuesday, the OPEC basket price stood at 64.32 dollars. It has been below the 70-dollar mark since October 15.

Other analysts said the cartel was aiming for a price of 80 or 90 dollars per barrel.

But if the oil producers lowered their total output by the higher end of the proposed ranges, "countries cannot afford that because their oil income would decrease even further," Fritz said.

Analysts said that because markets were focused on falling demand at the moment, a smaller cut would likely have little sustained impact on prices.

That would be especially be the case if OPEC decided to implement its cuts in smaller steps, said Gareth Lewis-Davies, director of commodities research at Dresdner Kleinwort in London.

"If they are doing it little by little it takes too long to impact the market," he said.

Citing the negative effect of the financial crisis on global oil demand, OPEC last week lowered its global crude oil demand forecast for 2009 by 450,000 barrels per day, to an average 87.2 million barrels per day.

At their last meeting in September, when the basket price still stood at 96.79 dollars, OPEC oil ministers tried to stem the falling price by limiting overproduction in excess of agreed quotas.

In July, OPEC's crude price stood at a historical high of 140.73 dollars per barrel.