Oil Drops 5 Pct As Markets Fall, OPEC

London Brent crude was 63 cents down at $52.50.

Oil dropped more than 5 percent to below $52 a barrel on Friday as U.S. stock markets fell and on signs OPEC would defer cutting production when it meets this weekend.

U.S. light crude for January delivery fell to $51.39 a barrel at 11:24 a.m EST (1624 GMT), down $3.05 from Wednesday's close. U.S. markets, including the New York Mercantile Exchange, were shut on Thursday for the Thanksgiving holiday, though crude did trade on Globex.

London Brent crude traded down to $51.02, off $2.11 from Thursday's settlement.

U.S. stocks slipped in thin holiday trade on Friday after a streak of gains as investors nervously eyed post-Thanksgiving sales to gauge how retailers will fare this holiday season.

"The market seems to refocusing again on the fact that the U.S. economy is in bad shape and as there has been a fall off in global economy," said Gene Mcgilllian, analyst, Tradition Energy, Stamford, Connecticut.

U.S. crude is on course to end the month down more than 20 percent, despite a supply cut of 2 million barrels per day by the Organization of the Petroleum Exporting Countries (OPEC) agreed at meetings in September and October.

"In theory, if supply gets cut, prices should go up, but the problem is what is the level of demand," said Adrian Pankiw, strategist at Henderson Global Investors.

"The question is: Is OPEC cutting supply faster than demand is falling?"

Falls in demand in top energy consumer the United States and other industrialized countries have helped drive U.S. crude down almost $100 from a record peak of more than $147 a barrel in July. It fell by almost a third last month, its biggest monthly drop ever.

Global oil demand is expected to decline slightly this year and next, the first fall in a generation because of the world economic downturn, according to a Reuters poll.

OPEC ministers gathering in Cairo for an informal meeting said they were likely to defer a decision on fresh output cuts until next month, despite an accelerating slump in fuel demand that has slashed the price of oil by two-thirds since July.

Several OPEC delegates have said the Cairo gathering is likely only to measure compliance with existing cuts, leaving a decision on any further reduction until the group's next policy-setting meeting on Dec. 17 in Algeria.

A Reuters poll this week of 15 analysts forecast by a narrow margin that OPEC would make no announcement of a further reduction in oil output this weekend but would probably do so at its meeting in Algeria.