Supplies of Russian gas to southeastern Europe dropped by an average 24.7 percent overnight Sunday-Monday amid a Ukraine-Russia supply row, a local unit of Russia's Gazprom said Monday.

Bulgaria, Greece, Macedonia, Romania and Turkey saw a fall of about 16 million cubic metres of gas between Sunday and Monday morning, according to Igor Yelkin, a representative from the Gazprom subsidiary which oversees distribution in the whole region.

Romania saw the biggest drop in supplies, by 33.8 percent, followed by Turkey, by 22 percent, and Greece, by 15.9 percent, Yelkin told Bulgaria's BTA news agency.

"The situation is changing every hour as Ukraine is switching compressor stations on and off without warning," he added.

According to Yelkin, the Ukrainian side could reduce the volumes even further.

"Gazprom is selling and transmitting gas steadily and reliably. Ukraine is the one that is breaking the contract," BTA cited him as saying.

Ukraine reported on Tuesday that volumes of gas from Russia destined for clients in Europe continued to drop in pipelines transiting Ukrainian territory.

"Supply is continuing to fall," a spokesman for Ukraine's state gas firm Naftogaz told AFP.

This observation confirmed plans announced on Monday by Russian gas giant Gazprom, which included the continued reduction of gas shipped through Ukraine by amounts corresponding with the volumes Moscow accused Kiev of "stealing."

The spokesman, Valentin Zemlyansky, said the volume of Russian gas dropped to 73.8 million cubic metres around 0800 GMT, down from 92 million cubic metres a few hours prior to that and 315 million cubic metres on Monday.

Supplies of Russian gas to Romania were slashed again, by more than two thirds, during Monday night, and the flow through one of two entry points had been cut totally, the economy ministery said on Tuesday.

"On January 6, at 3:00 a.m. (0100 GMT) the Russian supplier of natural gas completely halted the delivery of gas to the Isaccea 2 station," the ministry said in a statement.

Following this shutdown, Economy Minister Adriean Videanu called a meeting of the council for emergency situations in order to analyse the situation, media reports here said.

Russian energy giant Gazprom has drastically cut gas deliveries via Ukraine, which will disrupt supplies to Europe, Ukrainian state gas company Naftogaz told AFP on Tuesday.

"They have reduced deliveries to 92 million cubic metres per 24 hours compared to the promised 221 million cubic metres without explanation. We do not understand how we will deliver gas to Europe," said Naftogaz spokesman Valentin Zemlyansky.

"This means that in a few hours problems with supplies to Europe will begin," he added.

The nearly 60-percent reduction came a day after Russian Prime Minister Vladimir Putin ordered Gazprom to start cutting supplies bound for Europe via Ukraine in retaliation for Ukraine's alleged theft of Russian gas.

Ukraine denies that it is siphoning off gas and has accused Russia of being behind the current gas crisis, which began on January 1 when Gazprom stopped deliveries to Ukraine's domestic market because of a bitter payment dispute.

A number of European Union countries have reported shortfalls in gas supplies as a result of the dispute. The EU depends on Russia for around a quarter of its total gas supplies.

Some 80 percent of Russian gas exports to the EU are pumped through Ukraine.

Ukraine said Tuesday that Russia had drastically cut gas supplies to Europe and warned of "problems" ahead as several European countries reported that deliveries of Russian gas had stopped.

Russian state-run energy giant Gazprom slashed deliveries of gas bound for Europe by nearly 60 percent, its Ukrainian counterpart Naftogaz said, as a six-day stand-off between the two countries deepened.

The announcement came a day after Russian Prime Minister Vladimir Putin ordered Gazprom to start cutting supplies bound for Europe via Ukraine in retaliation for Ukraine's alleged theft of Russian gas.

Ukraine denies siphoning off Russian gas and has accused Moscow of engineering the crisis.

Meanwhile officials in Sofia reported that deliveries of Russian gas to Bulgaria, Greece, Macedonia and Turkey had been halted overnight in the latest sign that the dispute is affecting downstream customers in the European Union, and beyond.

And Austria said that deliveries of Russian gas had fallen to 10 percent of the expected amount.

An EU delegation was in Kiev to discuss the crisis with senior Ukrainian officials. The 27-member bloc has yet to take sides in the stand-off, which stems from a bitter payment dispute between the two ex-Soviet countries.

Valentin Zemlyansky, a spokesman for Ukraine's Naftogaz, warned ahead of the meetings that Europe would face "problems" due to the massive Russian gas cut.

"They have reduced deliveries to 92 million cubic metres per 24 hours compared to the promised 221 million cubic metres, without explanation. We do not understand how we will deliver gas to Europe," Zemlyansky told AFP.

"This means that in a few hours problems with supplies to Europe will begin," he added.

In Sofia, the Bulgarian ministry for the economy and energy said that gas supplies for several southeast European countries and Turkey had halted overnight and that it would convene an emergency meeting.

"Deliveries of natural gas at the Bulgarian-Romanian frontier for Bulgargaz, destined for the Bulgarian market and for onward transit towards Greece, Turkey and Macedonia, were stopped at 3:30 am (0130 GMT) Tuesday," a statement said.

In Vienna, Austrian energy company OMV said that deliveries of Russian gas to Austria have fallen to a fraction of the expected amount, adding that it would have to tap into its reserves.

Other EU countries including Hungary and the Czech Republic have also reported shortfalls.

On Monday, Putin met with Gazprom chief executive Alexei Miller and ordered him to cut volumes of natural gas shipped through Ukraine by amounts equivalent to those Moscow has accused Ukraine of stealing.

"Start reducing it from today," Putin told Miller during the meeting at his residence outside Moscow.

The Gazprom boss said the company would do its best to make up for the shortfall by sending more gas to Europe through Belarus, Poland and Turkey.

Russia stopped shipping gas to Ukraine's domestic market on January 1 saying Kiev owed it over two billion dollars in unpaid bills and late-payment fines.

The EU depends on Russia for around a quarter of its total gas supplies, some 80 percent of which are pumped through Ukraine. A similar Russia-Ukraine dispute three years ago disrupted supplies across Europe.

Russian gas supplies to Hungary fell to less than 20 percent of the planned figure early on Tuesday, the head of the company running the Hungarian gas network said.

Only 6.0 to 7.0 million cubic feet arrived Tuesday morning, via Slovakia and Austria, instead of the 38 million that had been expected according to the contract, said Janos Zsuga who heads the gas subsidiary of energy group MOL.

"We can replce the missing amount from our reserves," Zsuga said.

Hungary uses 68-70 million cubic metres of gas per day but has inventories of 3.5 billion cubic metres.

On Monday, Hungarian Energy Minister Csaba Moinar had said that deliveries of Russian gas to Hungary had fallen by about 20 percent owing to a payment dispute between Russia and Ukraine.

The amount of gas reaching Hungary via Austria has droped because Ukraine is restricting deliveries to western Europe via Slovakia, the head of the subsisidary of the MOL group responsible for the Hungarian gas network said.

Supplies of Russian gas to Bulgaria, Greece, Macedonia and Turkey were halted overnight, the Bulgarian ministry for the economy and energy said on Tuesday saying the dispute had thrown Bulgaria into crisis.

"Deliveries of natural gas at the Bulgarian-Romanian frontier for Bulgargaz, destined for the Bulgarian market and for onward transit towards Greece, Turkey and Macedonia, were stopped at 3:30 am (0130 GMT) Tuesday," the ministry said in a statement.

The reduction of supplies of gas, used widely for heating in Europe, comes as bitter cold grips many countries in central and western Europe.

Ukraine's Ambassador to Sofia Victor Kalnik told the Focus news agency that Moscow itself had ordered the halt of deliveries to the Balkans.

"The orders for the transit are made by Russia and Ukraine performs its obligations as a transit country. Meanwhile 15 million cubic metres of gas were turned without warning to Moldova by Moldovgas overnight from the Ukrainian station in Odessa," he explained.

Bulgaria's Economy and Energy Minister Petar Dimitrov appealed to both Kiev and Moscow to end the row which had plunged Bulgaria into a "state of crisis."

"The problem is rather political than economic. Russia and Ukraine have to find a solution. The energy systems of dozens of countries are disrupted," Dimitrov told the national radio.

Bulgaria's state-owned gas monopoly Bulgargaz said that deliveries were halted "without warning" and that according to the Russian side it was Ukraine that turned the tap.

Bulgargaz appealed to consumers to use "all possible alternative fuels."

The company said in a statement that it will introduce a gas "rationing" for the industry channelling gas only when it is vital for plant safety.

The ministry of economy and energy already summoned an emergency meeting to address industrial safety concerns.

It also appealed to all gas consumers in the country to "limit their gas consumption to the minimum and turn to alternative energy sources where possible."

Bulgaria is the only country in the Balkans which is almost totally dependent on Russian gas to cover its daily consumption of 12 million to 13 million cubic metres as the country lacks any major natural gas resources and access to alternative gas routes.

Russia covers 92 percent of Bulgaria's total natural gas needs. In 2007, the country imported about 3.7 billion cubic metres of Russian gas, or 1.7 percent more than in 2006.

Bulgaria is currently compensating for the cut in Russian supplies by pumping the maximum 4.3 million cubic metres of gas a day from its only underground gas storage at Chiren, to the country's northwest, the statement said.

The depot holds a total of about 300 million cubic metres of gas but Dimitrov said on Tuesday that pressure would fall as more gas was pumped out of it and it would no longer be able to ensure maximum outflow.

On Monday, the government asked big consumers such as engineering and chemical companies and heating plants to switch to alternative fuels when possible.

Bulgarian homes were not directly threatened though as only a fraction of them use gas for heating or cooking.

Heating plants in Sofia and the big cities were nevertheless mostly gas-fired, which might spell mid-winter central heating cuts for consumers. Temperatures across Bulgaria dropped to below minus 15 Degress Celsius (5 Degrees Fahrenheit).

The president of the association of heating companies, Valentin Terziyski, however said that four days were necessary for a plant to switch from gas to fuel oil.

Turkey's energy minister said on Tuesday that the flow of Russian natural gas through a pipeline via the Balkans had been cut over a row between Russia and Ukraine, Anatolia news agency reported.

The minister said that Russia had increased supplies to Turkey through another gas conduit linking the two countries.

The flow to Turkey through a pipeline running via Ukraine, Romania and Bulgaria, which amounted to 32 million cubic metres per day, stopped "entirely" on Tuesday after initially falling to 17 billion cubic metres, Energy Minister Hilmi Guler said.

Russia started pumping more gas to Turkey via the Blue Stream conduit, which runs under the Black Sea and links the two countries directly, he said, adding that the amount was increased from 40 to 48 milllion cubic metres per day.

Other measures against the cut include the use of liquefied petroleum gas (LPG) supplies and gas stored in underground depots, he said, adding that gas-fired power plants had also switched to alternative fuels.

The flow of Iranian gas to Turkey is continuing normally at a daily rate of 15 million cubic metres, Guler said.

On Monday, Russian Prime Minister Vladimir Putin ordered Russia's state-run gas company Gazprom to start cutting supplies bound for Europe via Ukraine in retaliation for Ukraine's alleged theft of Russian gas.

Ukraine denies siphoning off Russian gas and has accused Moscow of engineering the crisis.

Guler said he would discuss the issue with the Ukrainian ambassador in Turkey and Gazprom officials.

Deliveries of Russian natural gas to Croatia were halted early on Tuesday, national gas operator PLINACRO said.

"Russian gas supplies to Croatia stopped flowing at 5:00 am (0400 GMT)," PLINACRO spokeswoman Neda Erdeljac told AFP.

The supplies were first reduced by 18 percent late on Monday, the country's oil and gas group INA said, calling upon all consumers to use gas sparingly.

Meanwhile, Croatia's economy ministry said reductions were to start for big consumers but households would not be affected immediately, national radio reported.

Croatia itself produces about 60 percent of the natural gas it needs, while the remaining 40 percent is imported from Russia.

Russia halted its gas supplies to Ukraine last week after the two ex-Soviet states failed to agree on payment terms.

Supplies of Russian gas to Bulgaria, Greece, Macedonia and Turkey were also halted overnight.

Russia will fulfill all its contractual gas export commitments to the European Union, President Dmitry Medvedev told Euronews television Tuesday.

"We will respect all our obligations as the principal provider of hydrocarbons to Europe," Medvedev said, a day after Brussels opted to postpone talks on a strategic partnership covering energy, diplomatic and military ties with the Kremlin by way of response to the five-day war in Georgia.

Medvedev said European consumers, and by extension capitals, need have no fears of a "cold winter," as "no-one wants to see that."

Russian Prime Minister Vladimir Putin said Sunday that Russia would seek to "diversify" its energy export interests.

"We have no intention of limiting (energy exports) in any way; we will abide strictly by our contractual obligations," Putin had said.

"But we are going to enlarge and diversify our export possibilities for these products which are so essential to the global economy."

Russia supplies a quarter of the EU's gas needs, as well as a part of its oil requirements.

German Economy Minister Michael Glos called on Russia and Ukraine on Tuesday to resume talks on a natural gas dispute that has diminished supplies to western Europe in the midst of a bitter cold snap.

"I expect an immediate resumption of negotiations," Glos told the Frankfurter Allegemeine Zeitung (FAZ) newspaper.

He was to receive on Tuesday the vice president of the Russian gas monopoly Gazprom, Alexander Medvedev, who is making a tour of Europe to defend Moscow's position in the struggle.

Russia cut its gas supply to Ukraine's domestic market on January 1 as part of a bitter payment dispute and has since accused Ukraine of illegally removing gas transiting its country for clients further downstream in Europe.

Ukraine denies stealing and has accused Russia of engineering the crisis.

The European Union depends on Russia for around a quarter of its total gas supplies, some 80 percent of which is pumped through Ukraine. A similar Russia-Ukraine dispute three years ago disrupted supplies across Europe.

A European Union delegation was also to meet with Medvedev in Berlin on Tuesday, a source close to Gazprom told AFP.

Glos told the FAZ that "Gazprom must first fulfill its contractual obligations. That concerns deliveries to other European countries" besides Ukraine.

Several eastern European countries, including Bulgaria, Greece and Romania have seen gas deliveries via Ukraine fall sharply.

Companies there, as in Germany, have prepared for such an event however, by stockpiling natural gas, which Glos said would protect Germans from any gas shortages.

Temperatures in eastern Germany are expected to reach minus 26 degrees Centigrade (minus 14.8 F) early on Wednesday.

One of the main uses of gas is for heating buildings.

The economy minister suggested that the dispute between Moscow and Kiev was not a political one but "was a question of important commercial interests."

Nepal was hit by transport chaos Monday with buses and taxis off the roads in a strike over rising fuel prices and falling revenues.

Nepal's state-owned fuel supplier raised prices by up to 27 percent earlier this month to keep pace with surging global crude prices, but the government barred transport operators from raising fares by more than 25 percent.

Dinesh Bhandari, an official from the Nepal Transport Entrepreneurs' National Federation, said operators had been left out of pocket.

"The government should allow us to increase the fare up to 35 percent," he said.

The strike left commuters in Kathmandu and travellers across the country stranded.

Nepal relies on India for all of its fuel supplies and the land-locked Himalayan country's state-run fuel supplier has been selling fuel at a loss for years, building up millions of dollars in debt.

Oil prices eased in Asia on Thursday after a stronger-than-expected US energy stockpiles report offset market worries over tensions in the oil-rich Middle East, dealers said.

New York's main futures contract, light sweet crude for delivery in November, was 11 cents lower at 87.29 dollars a barrel in late morning trade.

"I think reality is coming back into play here," said Steve Rowles, an analyst with CFC Seymour in Hong Kong.

After six straight sessions of rising prices in New York, the contract finished lower there on Wednesday, settling at 87.40 dollars per barrel after spiking to a new high of 89.00 dollars in intra-day trade.

The fresh peak came just after the Turkish parliament voted to allow military strikes against Kurdish rebels based in northern Iraq.

Brent crude for December delivery was 36 cents lower at 82.77 dollars a barrel.

The Brent November contract expired on Tuesday after hitting an all-time high of 84.49 dollars.

Tensions along the Turkey-Iraq border helped oil prices gain more than four dollars this week before their pullback.

"The worst-case scenario was plaguing the market," Rowles said.

Turkish legislators on Wednesday approved a government motion seeking a one-year authorisation for one or more incursions into Iraq but the motion leaves it up to the government to determine the timing and scope of the operation and the number of troops to be sent.

A comment on Wednesday by US President George W. Bush highlighted uncertainties in the Middle East. He said he has warned world leaders they must prevent crude producer Iran from getting nuclear weapons "if you're interested in avoiding World War III."

Abdalla Salem El-Badri, chief of the Organisation of the Petroleum Exporting Countries (OPEC), expressed "concern" on Tuesday at surging prices but argued they did not reflect the true state of supply and demand.

The US Department of Energy (DoE) said Wednesday that American crude reserves jumped 1.8 million barrels in the week ending October 12, beating analyst forecasts of 1.05 million.

Stockpiles of distillates, which include diesel and heating oils, leapt by 1.0 million barrels, confounding market expectations of a drop of 750,000 barrels.

"The DoE's report is bearish. The builds in both gasoline and crude oil stockpiles were greater than forecast, and the build in distillate inventories was unexpected. Meanwhile, the demand numbers continue to look very weak," Eric Wittenauer, an analyst at AG Edwards, said during US trading hours.

The situation with deliveries of Russian gas to Europe "changed very dramatically" overnight and is "getting worse," a top member of a European Union delegation in Kiev said on Tuesday.

"The situation changed very dramatically. The amount of gas transported from Russia to Ukraine decreased and the situation of the Slovakian border is getting worse," said Czech Industry and Trade Minister Martin Riman.

A key pipeline for the exports of Russian gas to Europe crosses the border from Ukraine into EU member Slovakia.

Riman -- whose country now holds the rotating EU presidency -- made the comments hours after several European countries reported that deliveries of Russian gas had dropped to a trickle or stopped altogether.

"Russia crudely violated agreements" by reducing gas deliveries, Olexander Shlapak, deputy chief of Ukraine's presidential secretariat, said at the meeting with EU officials.

Earlier on Tuesday, Ukrainian state gas firm Naftogaz said that Russia had slashed Europe-bound gas deliveries via Ukraine by nearly 60 percent.

The cut came after Russian Prime Minister Vladimir Putin on Monday ordered state-run energy giant Gazprom to cut deliveries bound for Europe via Ukraine in retaliation for Ukraine's alleged theft of Russian gas.

Ukraine has denied that it is siphoning off gas and blamed Moscow for engineering the crisis.

The crisis began on January 1 when Gazprom cut gas deliveries to Ukraine's domestic market, saying that Kiev owed it more than two billion dollars in unpaid bills and late-payment fines.

Oil prices eased slightly in Asia on Wednesday but remained above 87 dollars per barrel in a market focussed on a potential Turkish incursion into northern Iraq.

While expressing concern at the price rise, the chief of the OPEC oil cartel said the world oil market remains well supplied.

New York's main oil futures contract, light sweet crude for delivery in November, was 23 cents lower in afternoon trade at 87.38 dollars per barrel.

In US trade on Tuesday, oil struck a record intra-day high of 88.20 dollars before dropping back to settle above 87 dollars for the first time, at 87.61 dollars per barrel.

On Monday it jumped more than two dollars.

Brent crude oil for December delivery was 23 cents lower at 83.32 dollars per barrel.

In London trade on Tuesday, Brent for November delivery advanced 1.41 dollars to settle at 84.16 dollars, after earlier hitting an all-time high of 84.49 during the session.

Oil prices surged as investors fixated on Turkey, where the parliament is expected to adopt a government motion on Wednesday to allow cross-border operations against bases of the Kurdistan Workers Party (PKK) in Iraq.

The White House has urged Turkey to refrain from any unilateral action that could further destabilise Iraq, while Iraq's deputy prime minister warned of "grave consequences" for the stability of his country and the region.

Steve Rowles, an analyst with CFC Seymour in Hong Kong, said the market has not been as worried over a geopolitical issue since last July when Israel and Hezbollah guerrillas battled in Lebanon.

That conflict led oil to spike to a then-record above 78 dollars per barrel.

Rowles said that while it is difficult to predict how the current tensions will play out, "I just think that overall the tensions will eventually subside."

Rowles said that Iraq "isn't the oil producer that it once was."

Abdalla Salem El-Badri, chief of the Organisation of the Petroleum Exporting Countries (OPEC), said Tuesday that the cartel was "concerned" at the price spike but argued current levels did not reflect the true state of supply and demand.

The market is "very well supplied," he said.

Rowles said he agreed. He said a weekly US Department of Energy report on inventories, to be issued later Wednesday, was expected to show a build up in crude stocks.

In the broader context he noted that the Atlantic Ocean hurricane season, which poses a potential threat to oil installations, is drawing to a close, and forecasts are for a relatively mild North American winter.

"Where is the problem?" he asked.

But Sucden analyst Michael Davies, commenting during US trading hours, said the surge in prices came amid "geopolitical and supply worries."

Many of Iraq's largest oil fields are located in the north of the troubled country.

Japan plans to start exploring its seabed to harvest rare earth elements used in electronics, hoping to reduce its heavy reliance on Chinese imports, a government official said Tuesday.

Japan would also try to develop its capacity to extract badly needed energy resources such as oil, gas and methane hydrate in the project, which eyes test exploration by the 2018 fiscal year.

Japan is believed to have plentiful resources under the sea but it has not previously exploited them due to the prohibitive costs of developing the underwater technology.

China is the source of a vast amount of the world's rare metals, which are used in semiconductors and components for hybrid cars -- key fields for Japanese companies.

"There is an increasing demand for mineral resources around the world, which has pushed prices higher," said an official of the Japanese government's ocean policy headquarters.

"The combined area of Japanese waters and the country's exclusive economic zone is the sixth-largest in the world, despite the nation's small land mass," he said.

Prime Minister Taro Aso's government aims to give the final go-ahead for the plan in March and to start implementing it in April, the official said.

Along with rare metals, Japan is estimated to have 5,000 years' worth of gold, silver and cobalt in its seabed along with 100 years' worth of methane hydrate, at current rates of usage.

Methane hydrate, a substance resembling ice, is believed to be rich in energy potential but scientists are still mastering ways to exploit it.

It is not yet known whether Japan's plan would involve parts of the East China Sea where Japan and China dispute undersea gas fields.

The row over the gas fields recently erupted again due to China's development of a gas field that Japan believed was still under negotiation.

Deliveries of Russian gas to Austria have fallen to 10 percent of the expected amount, Austrian energy company OMV said on Tuesday, adding that it would have to tap into its reserves.

The reduction came as a spell of bitter winter cold gripped much of Europe.

"Given current meteorological and consumption conditions, energy supplies to Austria are assured," the company insisted.

It said the the shortfall could be compensated by "calling on reserves" held by OMV subsidiary EconGas, which total 1.7 billion cubic meters.

OMV said Gazprom, the Russian state gas monopoly, had initially announced a reduction of 30 to 40 percent but that by 0700 GMT on Tuesday supplies had fallen to 10 percent of the expected amount.

The head of OMV's gas division, Werner Ali, said the company had been in "permanent contact with its partners in Gazprom.

"We were prepared for this situation and have already taken measures to inject some of our reserves into the supply network, if necessary."

Russia cut gas supplies to Ukraine, a key transit point for Europe-bound natural gas, on January 1 as part of a bitter payment dispute.

Moscow has since accused Ukraine of illegally removing gas transiting its country for clients further downstream in Europe.

Ukraine denies stealing and has accused Russia of engineering the crisis.

The European Union depends on Russia for around a quarter of its total gas supplies, some 80 percent of which are pumped through Ukraine. A similar Russia-Ukraine dispute three years ago disrupted supplies across Europe.

Russian Prime Minister Vladimir Putin on Monday ordered gas giant Gazprom to start cutting supplies to Ukraine bound for European consumers in response to Kiev's alleged siphoning from pipelines.

At a meeting in Putin's residence outside Moscow, Gazprom chief executive Alexei Miller said the company would do its best to make up for the shortfall by sending more gas to Europe through Belarus, Poland and Turkey.

"Start reducing it from today," Putin told Miller, referring to a plan outlined by the Gazprom supremo to cut volumes of natural gas shipped through Ukraine by amounts equivalent to those Moscow has accused Ukraine of stealing.

Supplies of Russian gas to southeastern Europe dropped by an average 24.7 percent overnight Sunday-Monday amid the row, a local unit of Gazprom said Monday.

Bulgaria, Greece, Macedonia, Romania and Turkey saw a fall of about 16 million cubic metres of gas between Sunday and Monday morning, according to Igor Yelkin, a representative from the Gazprom subsidiary which oversees distribution in the whole region.

Romania saw the biggest drop in supplies, by 33.8 percent, followed by Turkey, by 22 percent, and Greece, by 15.9 percent, Yelkin told Bulgaria's BTA news agency.

"The situation is changing every hour as Ukraine is switching compressor stations on and off without warning," he added.

According to Yelkin, the Ukrainian side could reduce the volumes even further.

Czech gas giant RWE Transgas said that gas supplies it receives from Russia via Ukraine fell by 9.5 percent on Monday after a 5 percent drop the day before.

Russian gas deliveries to Hungary have fallen by over 20 percent, Hungary's energy minister said Monday, confirming an earlier announcement about an impending cut.

Russia cut its gas supply to Ukraine's domestic market on January 1 as part of a bitter payment dispute and has since accused Ukraine of illegally removing gas transiting its country for clients further downstream in Europe.

Ukraine denies stealing and has accused Russia of engineering the crisis.

The European Union depends on Russia for around a quarter of its total gas supplies, some 80 percent of which is pumped through Ukraine. A similar Russia-Ukraine dispute three years ago disrupted supplies across Europe.

Eager to avoid any panic on the markets or in European households during a cold snap, the European Commission said gas stocks were high despite some drops in supply.

"There have been some irregularities but there is no substantial disruption of supply to member states at this point of time," said Ferran Tarradellas, a spokesman for EU Energy Commissioner Andris Piebalgs.

"The level of the stocks are quite high," he assured. "This is why we are confident that there is going to be no problem to supply in the coming weeks for consumers in Europe."

EU envoys were nonetheless holding a hastily-arranged meeting in Brussels on the dispute on Monday, while an EU delegation including EU Director General for Energy Matthias Ruete headed to Kiev to discuss the problem.

Miller told Putin on Monday that Ukraine had since January 1 "stolen" 65.3 million cubic metres of gas that were supposed to have flowed through pipelines that cross its territory on to customers in the European Union.

Referring to the debt Gazprom says it is owed by Ukraine that is at the heart of the dispute, Miller said it was still above 600 million dollars, but added: "If they continue to illegally take gas it will soon be billions."

Despite its heavy reliance on Russian gas imports, the EU has so far tried to avoid being dragged into being an arbiter in the dispute.

As the crisis entered its fifth day, Russia and Ukraine continued their slanging match, accusing each other of being responsible for supply problems.

Speaking to journalists in Paris, Gazprom deputy chief executive Alexander Medvedev accused Ukraine on Monday of stealing 50 million cubic metres of gas and withholding deliveries to EU countries.

Ukrainian gas company Naftogaz in turn accused the Moldovan unit of Gazprom of siphoning off gas bound for the Balkans, affecting supplies further downstream to Bulgaria, Greece, Macedonia, Romania and Turkey.

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China on Tuesday rejected an accusation by Japan that it was violating an accord on disputed offshore gas fields and suggested Tokyo misunderstood last year's agreement.

"Our position is unchanged. We hope Japan does not misinterpret the principled consensus of the two countries," foreign ministry spokesman Qin Gang told reporters.

Qin had been asked to respond to a top Japanese government official's statement the day before that Tokyo "cannot accept" China's continued development of the Tianwaitian gas field in the East China Sea.

"Japan cannot accept China's unilateral development," Chief Cabinet Secretary Takeo Kawamura, the government's spokesman, told reporters Monday.

Asia's two largest economies struck a deal in June last year to end a lingering spat over undersea gas fields which Japan maintains may extend into its exclusive offshore economic zone.

Under the deal, Japan agreed to invest in one field in the area, and jointly develop another.

The Tianwaitian field was not specifically mentioned in the June agreement but Japan contends it is covered by part of the accord which calls for further negotiations on other fields.

Japan contends Tianwaitian should remain untouched until talks settle its status.

Qin said both sides were maintaining contact on the issue, but gave no details.

Foreign Minister Hirofumi Nakasone has confirmed press reports that Japan has made an official protest to China.

"This is extremely regrettable. We have issued protests to the Chinese side," Nakasone said.

Qin, however, said Sunday the area in question was within "China's undisputed territorial waters."

Hong Kong gold prices opened lower Tuesday at 855.00-856.00 US dollars an ounce, down from Monday's close of 874.00-875.00 dollars.

World oil held steady above 36 dollars on Friday, at its lowest levels in more than four years, after OPEC's announcement of a record production cut failed to rally prices.

New York's main futures contract, light sweet crude for delivery in January, rose four cents to 36.26 dollars a barrel, off its morning low of 36.04.

The contract dived 3.84 dollars to 36.22 dollars, its weakest finish since July 2004, on the New York Mercantile Exchange Thursday.

Brent North Sea crude for February delivery slumped 2.17 dollars to settle at 43.36 dollars a barrel on Thursday in London.

A slowing global economy and resulting fears of weaker energy demand have pulled prices down from record highs of 147 dollars a barrel reached in July.

In a bid to shore up prices, ministers of the Organisation of the Petroleum Exporting Countries (OPEC) on Wednesday approved a record output cut of 2.2 million barrels a day, about 7.0 percent of the cartel's output quota.

Before the latest cuts, OPEC's official daily output target was 27.3 million barrels a day.

"The verdict (of falling prices) was a resounding vote of no-confidence in the cartel's ability to curtail production given its previous tendencies to backslide on commitments, particularly by countries who are financially strapped," said MF Global oil analyst Ed Meir.

Hong Kong gold prices closed higher on Friday at 875.00-876.00 US dollars an ounce, up from Wednesday's close of 866.00-867.00.

It opened at 883.00-884.00 dollars.

The market was closed on Thursday for the New Year holiday.

Russia does not rule out joining the oil cartel OPEC, President Dmitry Medvedev said Thursday, according to the Interfax and Ria Novosti agencies.

"I would like to say that we are ready to protect ourselves as this is our base income, oil and gas," the agencies quoted him as saying in the town of Kurgan outside Moscow.

"Such protective measures can be linked to a reduction in oil production volumes, joining existing orgaisations of suppliers as well as participation in new organisations, if we can agree about this ahead of time," he added.

Russia is not an OPEC member but ranks alongside Saudi Arabia, de facto leader of the cartel, as the world's largest oil exporter.

OPEC slashed its forecasts for global oil demand on Tuesday, predicting that demand would actually contract both this year and next year as major industrialised countries "slip deeper into recession."

"The deteriorating economies in OECD countries are estimated to reduce total world oil demand by 150,000 barrels per day (bdp) or 0.2 percent for 2009 to average 85.7 million bpd," the Organization of Petroleum Exporting Countries wrote in its latest monthly report.

For the current year, OPEC cut its world oil demand forecast to show a decline of 66,000 bpd to average 85.8 million bpd.

World oil prices dropped below 105 dollars in Asian trade on Monday amid continuing concerns that energy demand would be affected by a slowing US economy, dealers said.

In afternoon trade, New York's main oil futures contract, light sweet crude for delivery in May, was 81 cents lower at 104.81 dollars per barrel.

The contract closed at 105.62 dollars per barrel during floor trading on Friday at the New York Mercantile Exchange.

Brent North Sea crude for May delivery fell 35 cents to 103.42 dollars a barrel, after settling at 103.77 in London on Friday.

Oil prices fell Friday after the United States Commerce Department reported that the US economy, the world's biggest oil consumer, grew at a tepid 0.6 percent in the fourth quarter last year.

Jason Feer, vice-president and general manager of energy market analysts Argus Media Ltd, said that because of an economic downturn in the United States, uncertainty clouds demand for oil over the next couple of months.

"The inventories overhang combined with softening demand is the reason for significant drops in pricing," he said in Singapore.

Economic output moderated in the fourth quarter during a widespread housing market downturn and as a related credit squeeze in the US banking system broadened in the final months of last year.

The credit crunch has worsened in recent months and a growing number of economists believe the US economy has now fallen into a recession.

Economic momentum slowed despite the US Federal Reserve's interest rate cuts. Since September, Fed policymakers have slashed the short-term federal funds rate to 2.25 percent from 5.25 percent in a bid to shore up growth.

Amid global supply disruptions, New York crude hit a record intraday high of 111.80 dollars on March 17 while London Brent scored a historic peak of 108.02 dollars earlier in March.

OPEC Secretary General Abdalla Salem El-Badri said here on Monday that the oil producers' cartel needs to approve a "very sizeable cut" in output when it holds a meeting here later in the week.

Asked by reporters what he would like the Organization of Petroleum Exporting Countries to decide on at Wednesday's meeting, El-Badri said: "A very sizeable cut."

"The market is oversupplied" with oil, El-Badri added on arrival in the Mediterranean port city of Oran.

"Stocks are very high. We have about 100 million barrels oversupply and we have to take it out of the market. And the situation is very difficult. We have to take action at this time," added the secretary general.

OPEC, the cartel pumping 40 percent of world oil, is this week set to announce plans to slash output in the hope of lifting crude prices weighed down by a recession-fuelled slide in energy demand.

Analysts are forecasting a cut of between one and two million barrels from OPEC's official daily output quota of 27.3 million barrels, excluding Iraq.

Crude futures have dived by as much as 70 percent since reaching all-time highs of above 147 dollars a barrel only five months ago, when fears of supply disruptions had sent them rocketing.

The ability of OPEC to influence the market will also depend on whether it succeeds with a campaign to convince major non-member producers such as Russia, Mexico and Norway to reduce their output too.

The International Energy Agency on Thursday said it expected global oil demand to fall this year for the first time since 1983 and cast doubt on the willingness of OPEC members to reduce their production.

"Global oil demand is now expected to contract in 2008 for the first time since 1983, shrinking by 0.2 million barrels per day," the IEA said in its latest oil market report.

As crude prices plummet from highs of 147 dollars a barrel in July to slightly above 40 dollars, members of producer cartel OPEC have expressed concern and announced cuts to their output in response to weakening demand.

But the IEA said the group had been unable to stick to its targets, with some countries -- notably Ecuador, Venezuela, Libya and Iran -- making "relatively limited" reductions to their output.

The Organisation of Petroleum Exporting Countries, which pumps 40 percent of world oil, has agreed on cuts of 2.0 million barrels per day this year and is widely expected to slash its production quota again at a meeting in Algeria on December 17.

"In the past OPEC has at times struggled to rein in production when crude capacity is rising, a phenomenon that is now reemerging in the face of weaker demand," said the report.

The IEA said that there was consensus that OPEC would decide to cut its output again in Oran, Algeria, but did not say by how much. Some analysts expect a cut of 2.0 million barrels per day.

"Perceived wisdom focuses on how much the reduction will be rather than whether it will occur," it underlined.

OPEC's ability to influence prices depends on whether the market believes the group will actually limit its production.

Its effectiveness is contingent on members obeying quota levels and when prices and revenues are falling there is a particular need for discipline. Some countries cheat at the expense of others by failing to implement cuts, thereby increasing their revenues.

OPEC cut its production by 760,000 bpd to 31.3 million bpd by the end of November as demand fell, the IEA said, noting that most of the cuts came from Gulf states.

"December supplies will likely be reduced further and OPEC ministers meet on December 17 to mull further target cuts," the IEA noted.

The IEA said it expected OPEC output to fall further to 30.7 million bpd next year in an effort to balance the market better.

Oil demand this year was revised down by 350,000 bpd to 85.8 million bpd.

Turning to forecasts in 2009, the IEA said that demand would grow again to downward revised 86.3 million bpd, basing its forecasts on International Monetary Fund projections for a pick-up in the global economy next year.

In its previous report, the IEA, which seeks to coordinate energy policies in leading industrialised countries, had predicted oil demand for this year and next at 86.2 million and 86.5 million bpd, respectively.

Growth in world daily oil supply, meanwhile, slowed to 165,000 bpd in November to bring the output total to 86.5 million bpd, it added.

"It's a pretty weak market, the fundamentals are weakening," said David Fyfe, chief IEA analyst.

"We would just caution that there may be some resilience in emerging countries ... OPEC might be overshooting (with production cuts)," Fyfe added.

Oil prices hit new record highs Tuesday amid heightened concerns about a potential Turkish incursion into oil-rich northern Iraq to attack Kurdish rebels.

New York's main oil futures contract, light sweet crude for delivery in November, closed above 87 dollars per barrel for the first time after striking a record 88.20 dollars in intraday trading.

The benchmark New York contract gained 1.48 dollars to settle at a record 87.61 dollars. On Monday it jumped more than two dollars a barrel.

In London, Brent North Sea crude for November advanced 1.41 dollars to settle at 84.16 dollars, after earlier hitting an all-time high of 84.49 dollars during the session.

Oil prices surged as investors fixated on Turkey, where the parliament was expected to approve a government motion to allow cross-border raids into Iraq for one year to root out the Kurdistan Workers Party (PKK).

"A good portion of the gains can be tied to the escalation in tensions between Turkey and Kurdish rebels, which has added a sizable geopolitical risk premium into prices over the last several trading sessions," said Michael Fitzpatrick, an analyst at MF Global.

The PKK, considered a terrorist group by Turkey and much of the international community, has been fighting for Kurdish self-rule in southeast Turkey since 1984.

The potential of a military conflict had the oil market on edge.

"This raises concerns any such action will jeopardize and possibly disrupt Northern Iraqi oil flows or flows through the Baku-Ceyhan pipeline across Turkey. If geopolitical tensions escalate further, prices have the potential to test 90 dollars this week," Fitzpatrick said.

Many of Iraq's largest oil fields are located in the north of the troubled country.

"The tensions in Turkey are the main driver here," said Nas Nijjar, a trader at CMC Markets.

"Now we have potential (supply) problems on top of that going into the winter."

Prices were additionally supported by concerns over potentially stretched global energy supplies, particularly during the forthcoming northern hemisphere winter, when demand for heating fuel hits a peak.

"Crude futures surged higher (on Tuesday), reaching fresh record highs in London and New York on continuing speculative and fund buying, amid persistent geopolitical and supply worries," said Sucden analyst Michael Davies.

OPEC chief Abdalla Salem El-Badri said the cartel was "concerned" at the price spike but argued that current levels did not reflect the true state of supply and demand in the market.

The Organization of the Petroleum Exporting Countries "is carefully watching developments in the oil market and has observed with concern the recent escalation in oil prices," OPEC chief El-Badri said in a statement.

"While (OPEC) does not favor oil prices at this level, it strongly believes that fundamentals are not supporting current higher prices and that the market is very well supplied," he added.

Dealers had been spooked Monday when OPEC cut its fourth-quarter non-OPEC production outlook by 110,000 barrels per day.

According to OPEC data, Iraq produced about 2.0 million barrels of crude per day in August. Before April 2003, it pumped an estimated 2.8 million bpd.

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Resource-hungry nations are snapping up huge tracts of agricultural land in poor Asian nations, in what activists say is a "land grab" that will worsen poverty and malnutrition.

Global trends including high prices for oil and commodities, the biofuels boom, and now the sweeping downturn, are spurring import-reliant countries to take action to protect their sources of food.

China and South Korea, which are both short on arable land, and Middle Eastern nations flush with petrodollars, are driving the trend to sign up rights to swathes of territory in Asia and Africa.

"Today's food and financial crises have, in tandem, triggered a new global land grab," the Spain-based agricultural rights group Grain said in a recent report.

It said that some deals were targeted at boosting food security by producing crops that would be sent back home for consumption, while others were to establish money-making plantations like palm oil and rubber.

"As a result of both trends, fertile agricultural land is being swiftly privatised and consolidated by foreign companies in some ofthe world's poorest and hungriest countries," it said.

In one of the biggest deals, South Korea's Daewoo Logistics said in November it would invest about 6.0 billion dollars to develop 3.2 million acres (1.3 million hectares) in Madagascar -- almost half the size of Belgium.

Daewoo plans to produce four million tonnes of corn and 500,000 tonnes of palm oil a year, most of which will be shipped out of impoverished Madagascar -- where the World Food Programme still provides food relief.

"We will build everything from ports and railways to markets on a barren and untouched area," said Shin Dong-Hyun, general manager of the WFP's financing and strategic planning department.

Although commodity prices have fallen from their highs earlier this year, resource-poor and heavily populated countries are still concerned about securing long-term supplies.

Walden Bello, from Bangkok-based advocacy group Focus on the Global South, said the looming global recession is not likely to halt the trend which he fears will worsen the lot of landless peasants.

"In a situation where global agricultural production has become so volatile and unpredictable, I would not be surprised if the Middle Eastern countries that are engaged in this would continue to push on," he told AFP.

Bello said that many of the deals were struck in dysfunctional and corruption-ridden nations, and rejected claims the land being signed away is of poor quality, and that the projects will bring jobs and improve infrastructure.

"What we're talking about is private parties using state contracts to enrich themselves," he said. "It's an intersection of corrupt governments and land-hungry nations."

In Cambodia, where the WFP also supplies aid, oil-rich Kuwait in August granted a 546-million-dollar loan in return for crop production.

Undersecretary of State Suos Yara said Cambodia was also in talks with Qatar, South Korea, the Philippines and Indonesia over agricultural investments including land concessions.

"If we do this work successfully, we can get at least 3.0 billion dollars from these agricultural investments," he said.

"With the (global financial) crisis, this is a chance for Cambodia to look to the future by pushing agriculture in order to attract foreign investments."

But opposition lawmaker Son Chhay said he was suspicious about why a wealthy nation like Kuwait needed to lease land to grow rice rather then just import the grain.

"Cambodian farmers need the land," he said, urging the government to limit the area under lease and ensure Cambodia was not plundered by foreign nations.

In the Philippines, another land lease hotspot, a series of high-profile deals has clashed with long-running demands for agrarian reform including land redistribution.

"It will aggravate the problem of landlessness, the insufficiency of land for Filipino peasants," said Congressman Rafael Mariano, who also heads the Peasants' Movement of the Philippines (KMP).

However the Philippine government is undeterred and during President Gloria Arroyo's visit to Qatar in December, officials opened talks over the lease of at least 100,000 hectares of agricultural land to the emirate.

Bello said he expected these sorts of deals to increase, forcing peasants from rural areas and into cities where together with the global downturn they will add to the ranks of the unemployed.

"It's particularly explosive in those countries where you have a high degree of landlessness, like the Philippines where seven out of 10 rural people do not have access to land," he said.

In the impoverished and corrupt dictatorship of Laos, some experts estimate that between two million and three million hectares have been parcelled off in a rampant and uncontrolled process that has now been suspended by the government.

The UN's Food and Agriculture Organisation has sounded alarm over the loss of land in a country where in rural areas, every second child is malnourished and access to land for foraging of natural resources is critical.

"If the environment is changed, with the trees cut and replaced with industrial crops," said FAO representative in Laos, Serge Verniau, "they can face serious danger".

When China hits the brakes, commodities exporters half a world away have to shift to a lower gear, as the rapidly deteriorating fortunes of the copper sector shows.

The global financial crisis has impacted China's copper-wired construction industry, machine makers and electric appliance producers at an amazing speed, with demand at home and abroad crumbling abruptly.

Just as precipitously, China, the world's largest consumer of copper, has passed on the misery to countries like Chile, its largest copper supplier.

Chile's mines have cut production and laid off workers, leading to violent strikes in some parts of the country.

"Business has fallen off a cliff," Simon Hunt, an independent UK-based analyst, said after recent visits to Chinese and other Asian copper firms.

About 30 percent of China's copper consumption goes into exports, Hunt said.

"The impact of these (global) developments on China's economy and its copper consumption will be dynamic," he said.

World copper prices have more than halved to less than 1.50 dollars a pound after record highs of four dollars in July, as China's once-ravenous hunger for commodities has slowed and weakening demand abroad has hurt exporters.

"As late as July, clients were calling, looking for assurance that China's copper demand would maintain strong growth," said Shi Lin, an analyst with British metal consultancy CRU. "Now everyone sees what happened."

"Growth in China's copper consumption accounted for 80 percent of the world's overall growth. It's no surprise copper prices were impacted so much by weakening Chinese demand," he said.

China's economic growth slowed to nine percent in the third quarter, the lowest level in five years, and the World Bank has predicted it will go down to 7.5 percent next year -- a 19-year low.

Copper has been a key raw material in China's economic boom, and it consumes a quarter of the world's supply, importing about 80 percent of its needs. Chile provides a third of China's total demand.

The drop in Chinese demand has led to copper projects in the South American country, such as Canada-based Quadra Mining's Sierra Gorda project, being shelved.

Commodities such as zinc, nickel, iron ore, and aluminium, too, have seen their prices plummet.

Anglo-Australian miner Rio Tinto said last month it slashed iron ore output at its Western Australia plants by 10 percent following a drop in demand from China. The company said Wednesday it would cut thousands of jobs globally.

The world's largest iron ore producer, Brazil's Vale -- whose principal market is China -- also slashed production.

The 2009 contract iron ore prices are expected to decline 35 percent as China's steel sector suffers an industry-wide loss following a fall in steel prices, according to China International Capital Corporation.

Economists suggested demand for raw materials in China was not only dented by slowing industrial production, but expectations of prices falling even further, suggesting the worst may be yet to come.

For example, copper will likely follow the economy. Australia's Macquarie Bank expects Chinese demand to slow to between six and seven percent growth, at 5.1 million tonnes for 2008, compared to nearly 18 percent in 2007.

It could fall to between four and five percent in 2009, according to Bonnie Liu, a Shanghai-based analyst with Macquarie.

Experts argue that Beijing's 586-billion-dollar economic stimulus plan was unlikely to boost copper prices anytime soon.

"China's infrastructure spending spree by itself will not be enough to turn around the decline in major global commodity prices," Frank Gong, a Hong Kong-based economist with JP Morgan Chase said in a note.

About a fifth of China's copper demand goes into construction, and the property market has also stalled, with prices rising only 0.2 percent on the year in November -- the slowest since monthly statistics began in 2005.

Hong Kong gold prices closed lower on Tuesday at 843.00-844.00 US dollars an ounce, down from Monday's close of 874.00-875.00 dollars.

It opened at 855.00-856.00 dollars.

China is expected to produce a total of 189 million tonnes of crude oil in 2008, an increase of 1.6 percent over last year, state media reported Sunday.

PetroChina, the nation's leading oil producer, released figures saying China had found more than 20.7 billion tonnes of proven oil deposits in the past 30 years, the Xinhua news agency reported.

China produced 186 million tonnes of crude oil in 2007, according to Xinhua. PetroChina, like many European oil companies, measures its output in tonnes instead of the US standard of barrels.

This year's output would be 189 million tonnes, an increase of 1.6 percent.

Two oil fields account for most of the country's oil production.

The Daqing Oil Field in northeastern China has pumped out 1.576 billion tonnes of crude oil over the past three decades -- more than 40 percent of China's total onshore crude output during that period.

The Shengli Oil Field on China's eastern coast has produced more than 805 million tonnes of crude in 30 years, or more than 20 percent of the onshore crude output nationwide for the period, Xinhua said.

China is also expected to produce 76 billion cubic metres of natural gas in 2008, up from 69.8 billion cubic metres last year, the report said.

China's once voracious appetite for oil has falled sharply due to the global economic slowdown and inventories are surging, the China National Petroleum Corp, or CNPC, said last month.

Lucrative Australian exports such as iron ore face a tough year as flatlining global growth and sluggish demand are set to topple resource prices from extravagant highs, analysts said.

Recent months have seen signs of stress in the country's mining boom, which has poured billions of dollars into the national economy over the past decade, with some mines shutting and projects scaled back amid the financial turmoil.

And after seven years of sky-high growth fuelled by Asian demand, the price of exports such as iron ore and copper is set to fall markedly as metal values contract, analysts said.

"The luxurious commodity prices, and importantly the volumes, particularly in iron ore and coal... just aren't going to be there next year," Tim Schroeders, Melbourne-based portfolio manager at Pengana Capital, told AFP.

Schroeders said a 60-70 percent fall in most metals in 2008 -- combined with slowing growth, large inventories and frozen credit markets -- meant that commodities should brace for further price falls in 2009.

"It's very difficult to ascertain price outcomes at the moment but we are getting back to very bombed-out levels in a lot of these commodities," he said.

Schroeders said the impact of falling commodity prices in Australia -- where resources excluding gold accounted for the biggest slice of export earnings in 2007, equal to 34 percent of total exports -- would be significant.

"And I can't see another sector of the economy in the short term picking up that slack," he said.

China's continued growth was the key positive for the mining industry but even that was unlikely to lift the gloom until mid-2009, he said.

"And we may well have another half year of malaise before the inventories are worked off, the stimulus packages start to work through the system and people generally feel a bit more confident that the world isn't ending."

Analysts say soon-to-be-negotiated contract prices for iron ore, a vital ingredient in steelmaking and one of the country's most valuable exports, will be a key indicator of Asian demand in the coming year.

Major miners BHP Billiton and Rio Tinto last year agreed to price hikes in the order of 80-97 percent with China's Baosteel for iron ore contracts, but 2009 is widely expected to bring an end to years of escalating price rises.

Mark Pervan, head of commodity research at ANZ Bank, said the worst-case scenario would be for iron ore contracts with the major Asian steelmaking companies to drop by 50 percent.

Pervan said while the US has been a major drag on commodity markets, this had in the past been more than offset by strong Chinese growth.

"That's going to change," he said. "What you've got now is an even weaker global demand story plus you don't have a strong offset from China, and that's why you've got the prices where they are today.

"And potentially they could go a little lower if we start to see further cracks in the Chinese growth outlook."

But he said metal prices were likely to begin to recover within three to six months.

Resources analyst at DJ Carmichael in Perth, James Wilson, said the most important factor in resource prices would be China, which he said had "turned into a lifeline pretty much" for Australian export commodities.

"A lot will depend on GDP data coming out of China," he said. "Are they going to be going down to seven percent GDP growth? Are they going to surprise on the upside?"

Wilson would not go as far as to say Australia's mining boom was winding down, but he said there would be serious challenges in 2009.

"I would say it's probably stalling," he told AFP. "The downturn in demand wasn't because of a global souring of sentiment towards metals, it was because the entire US went completely bankrupt overnight."

Kuwaiti Oil Minister Mohammad al-Olaim said on Monday that OPEC will cut output because the market was over-supplied but refused to be drawn on the size of the reduction.

"We are going for a cut in productio. We will discuss there (in Algeria) what the (size of) the cut that will be taken," Olaim told reporters before departing for an OPEC meeting in the Algerian city of Oran.

Olaim refused to be drawn into saying how much OPEC should reduce production, adding this decision should be taken by all OPEC ministers.

"There is a surplus in the market and the supply is more than the requirements of the market," he said.

"There is a building up of inventories for the time being which have exceeded the average of the last five years. We are talking now about 56.8 days which is more than the average."

Oil traded near 40 dollars a barrel on Thursday, at its lowest levels in more than four years, despite OPEC's announcement of a record production cut.

New York's main futures contract, light sweet crude for delivery in January, was down five cents at 40.01 dollars a barrel, off a low of 39.19 dollars.

The contract closed at 40.06 dollars a barrel on Wednesday at the New York Mercantile Exchange, a decline of 3.54 dollars.

Brent crude oil for February delivery rose 10 cents to 45.63 dollars a barrel, off a low of 45.35, after falling 1.12 dollars to close at 45.53 Wednesday in London.

The Organisation of the Petroleum Exporting Countries (OPEC), the cartel that produces about 40 percent of the world's crude, approved a record output cut of 2.2 million barrels of oil a day on Wednesday.

Ministers of the 13-member OPEC, meeting in Oran, Algeria, agreed to the output reduction in a bid to shore up prices that have slumped because of falling demand in a slowing global economy since hitting record highs above 147 dollars in July.

It was the third time in three months that OPEC has lowered production, and the largest reduction since the cartel introduced production quotas in 1982.

Before the latest cuts, OPEC's official daily output target was 27.3 million barrels a day but analysts said the cartel was producing slightly more than this as some members tried to boost income.

Analysts questioned whether the latest cuts would be sufficient against rapidly falling demand in a slowing global economy.

Oil fell Wednesday despite a record fall in the US dollar against the euro, a day after the US Federal Reserve slashed its base lending rate to virtually zero. A weak greenback tends to lift the price of dollar-priced oil for buyers using cheaper currencies.

"If a plunging dollar and a zero interest rate can't save oil, don't think that OPEC can. The market is bigger than the cartel and the demand destruction is something that will not be cured by trying to raise prices," said Phil Flynn, an analyst at Alaron Trading.

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Hong Kong gold prices opened higher Monday at 877.00-878.00 US dollars an ounce, up from Friday's close of 875.00-876.00 dollars.

On the eve of a European summit, French and German ministers attending UN climate talks warned on Wednesday the outcome in Brussels would sway the world's campaign against global warming.

French Sustainable Development Minister Jean-Louis Borloo, whose country is current European Union president, said the deal on the table in Brussels on Thursday and Friday was "crucial" for the planet's future.

"It will be the first time that a continent has committed itself to targets and the means for achieving them," Borloo told reporters during the December 1-12 talks in Poznan, Poland.

"I hope with all my heart that it comes off. A failure in Brussels would be dramatic in Poznan... tears will be shed."

The 27 nations of the EU have championed demands for a tough pact to curb greenhouse gas emissions under the UN Framework Convention on Climate Change (UNFCCC) and its own goals are the most ambitious of any advanced economy.

They include 20 percent less greenhouse gas emissions by 2020 compared with 1990 levels, increased use of renewable energy sources and overall energy savings.

But problems have emerged on how to achieve the lofty aims.

Former Soviet bloc countries in the EU, as well as Germany and Italy, have hurled down roadblocks to the deal, prompting President Nicolas Sarkozy of France to throw himself into a rush of diplomacy ahead of the Brussels gathering.

Poland and other EU newcomers are worried about the cost of reducing emissions from coal, on which they massively depend. Italy has complained about the cost to key Italian industries, such as ceramics and paper.

Germany, meanwhile, wants large parts of its industry exempted from the auctioning of carbon emission rights.

German Environment Minister Sigmar Gabriel said in Poznan on Wednesday he was confident a deal would be struck in Brussels.

Without it, the EU risked losing its vanguard role and giving the impression it was "no longer serious" on climate change, he told journalists.

Leading economist Nicholas Stern warned backsliding by the EU could wreck momentum at the UNFCCC, where a deadline has been set of December 2009 for building a treaty that will address carbon emissions beyond 2012, when pledges under the Kyoto Protocol expire.

"You can see the US and China moving (on climate change). We will destroy or undermine that movement if we go flaky in Europe now," Stern, author of a landmark 2006 report on climate change, said on Tuesday.

Borloo said the convergence of international events had badly complicated progress at the UN level to head towards a new global treaty on tackling climate change.

It would have been preferable to have a long gap to digest the consequences of Barack Obama's presidential election victory and the endorsement of the EU package, he said.

"If the Poznan meeting had taken place six months from now, we could have speeded things up, but it's not possible in the current circumstances," said Borloo.

But, he said, "if the climate-energy package is not adopted (in Brussels), it's here in Poznan that tears will be shed."

China's top economic planner warned Wednesday that the global economic crisis would pose great challenges for China, as he urged the government to fine tune its large-scale stimulus plan.

"We are confronted with great challenges resulting from a dramatic change in the world economic and financial situation," Zhang Ping, head of the National Development and Reform Commission, China's planning agency, told parliament.

"If we are unable to properly deal with the difficulties, we might be faced with grave risks in failing to realize our strategic goals in economic and social development."

In the remarks carried by the official Xinhua news agency, Zhang was referring to the government's hope to maintain fast-paced and sustainable growth to ensure employment for its huge population of 1.3 billion people.

The economic planner told parliament that since the third quarter the impact of the global meltdown had spread from China's coastal regions to its inland areas and from export-oriented industries to other sectors.

Along with slowing third quarter growth, investment demand had weakened and industries were facing falling revenues and lower profits, he said.

The government's announced 586-billion-dollar stimulus package aimed at stimulating domestic consumption was a good start, he said, but needed to be carefully targeted.

"Detailed plans on expansion of domestic demand over the next two years should be formulated as soon as possible," Zhang said. "Measures to maintain stable export growth should be formed without delay."

China's economic growth slowed to 9.0 percent in the third quarter of this year as global financial woes started taking a toll, prompting the government to announce the stimulus package.

As a result of the slowdown, growth in the world's fourth-largest economy weakened to 9.9 percent over the first three quarters of the year.

"Sustainable development should be emphasized by promoting energy conservation and emission reduction," Zhang said, referring to another strategic goal.

"Employment should be a priority in the government agenda over the next two years," especially the employment of migrant workers, some who have already lost their jobs due to the economic slowdown, he said.

Barack Obama on Wednesday named New Mexico Governor Bill Richardson as his commerce secretary, dubbing him a top "economic diplomat" who would help lead the United States out of the financial crisis.

The president-elect added to his rapidly-filling cabinet at a news conference here and denied the post was a consolation for Richardson, a former Democratic presidential rival, who was passed over for secretary of state.

Richardson, 61, will start "laying the groundwork for long-term prosperity to help American businesses grow and thrive at home and expand our efforts to promote American enterprise around the world," Obama said.

"This work is the core mission of the secretary of commerce and with his breadth and depth of experience in public life, Governor Richardson is uniquely suited for this role as a leading economic diplomat for America."

Richardson, 61, a veteran diplomatic troubleshooter, ex-lawmaker, and energy