OPEC oil exporters, including cartel leader Saudi Arabia, are ready to do whatever it takes to defend world oil prices near $25 per barrel, a Gulf source close to Saudi thinking said on Tuesday.

The 11-member exporters' group is set to hold an emergency meeting on April 24 to discuss possible output cuts after prices slumped 30 per cent in the past month.

"OPEC will do whatever is necessary to make sure that the price stays not only within the ($22-$28) price band, but also close to the target price of $25," the Gulf source said.

He declined comment on whether it might cut formal output quotas, now at 24.5 million barrels per day, or simply decide to rein in the two million barrels daily of excess now being pumped in excess of quota limits.

UAE Oil Minister Obaid bin Saif al-Nasseri said member countries should rein in overproduction but said talk of cutting those quotas at the meeting was premature.

"The retreat in oil prices returns basically to political factors and speculation in the recent period in addition to extra production by some OPEC members above their production quotas," Nasseri was quoted saying by his national news agency.

OPEC's reference crude price stood at $24.91 per barrel on Monday, having dropped from above $33 last month. Since 2000, OPEC has adjusted its output aiming to keep prices within a range of $22-$28 per barrel.

OPEC President Abdullah al Attiyah on Monday proposed the emergency meeting to discuss cutting supplies, saying he feared a glut of oil on world markets.

On Tuesday he told Reuters: "OPEC will do whatever is necessary to balance supply and demand. It's an open agenda."

Prices have dropped after substantial US-led military progress in Washington's war on Iraq, despite estimates by the military that Iraqi oil will not flow again for three months.

Attiyah, who is also oil minister of Qatar, said there was a risk of prices falling further.

Quota busting

OPEC Secretary-General Alvaro Silva said last month that members were authorised to use their spare capacity if necessary to make up for a shortfall from Iraq, which stopped sales at the middle of the month.

A Reuters survey of output in March found the 10 members with quotas, excluding Iraq, pumped two million bpd above the 24.5 million bpd ceiling. US ally Saudi Arabia, the world's top exporter and OPEC kingpin, accounted for three quarters of the excess.

A Gulf analyst said the fundamentals of supply and demand showed the market was "balanced", and the dizzying fall in prices was overdone.

The analyst, asking not to be named, said the price drop was exaggerated by a rush of speculative money out of oil futures and into the stock market, which has rallied strongly over recent days.

"If you look at pure fundamentals, the market is okay and if you look at stocks it is really very low, in absolute terms lower than normal," the Gulf analyst said.

Former Venezuelan Energy Minister Alirio Parra said he did not think OPEC needed to cut formal output ceiling, because output from other OPEC countries was already far above existing quota levels.

"OPEC can do little except reaffirm their quotas, remove the laxity of it, go back to the quotas and try to stick to them," he said.

"We are in the low demand season, but inventories are low and have not been built up yet," he added.

Oil prices have also come under selling pressure as the latest data on the US economy have raised concerns that it may be heading into recession, which would choke demand for petroleum.

Ministers of the Organisation of the Petroleum Exporting Countries were previously scheduled to meet next on June 11 in Doha, Qatar.