Oil cartel Opec has indicated it will cut output to firm up prices, possibly as early as Friday when members meet in Vienna.

Pressure is mounting on the group to reduce supplies as oil prices have fallen more than 50% from July's record of $147.27 and expectations have grown that a global recession will erode fuel demand.

Oil extended gains by more than $1 today to just over $73 a barrel after news of the potential cut. US crude was up 90 cents at $72.75 a barrel while Brent rose 65 cents to $70.25.

In an unusual move, maverick Venezuelan President Hugo Chavez has targeted $80-$90 a barrel as a price that would be "more than enough" to keep his country solvent.

Opec president and Algerian oil minister Chakib Khelil said the output cuts would probably come in two stages - one now and one in December.

"It is not clear that we will take the decision to reduce supplies by two million barrels per day but it very likely that we will take a reduction decision this time and another decision later on to ensure prices stability," Khelil said in Algiers.

He said Opec could hold a meeting before its planned gathering in Algeria on 17 December.

"I think that in the upcoming period [between 24 October and 17 December] there would be change in oil prices. And because of that, a meeting must take place or at least close co-ordination among Opec members to take the right decision at the right time," he added.

Khelil rejected calls from the West to hold output at current levels and said producers were entitled to defend the value of their earnings from oil exports.

"All the needs of consumer countries will be fully satisfied because Opec members want not to see the global economy deteriorating as it is now," he said.

Futures markets are expecting sharp discounts to current prices. Options contracts to sell oil at $50 by December have soared 28-fold on the New York Mercantile Exchange in the past two weeks.

The contracts, which allow holders to sell 1000 barrels of oil for $50 each by December, are trading at about $280 on the Nymex, up from $10 at the beginning of the month.

Goldman Sachs and Merrill Lynch analysts say crude may drop another 44% if the world economy slips into recession.

"Opec is going to try to prevent some of the price decline," Francisco Blanch, head of global commodities research at Merrill in London, told Bloomberg television. "It's going to be very difficult to stem a price fall."