Iran's OPEC governor says the oil cartel needs to decrease its output to balance the global markets which have faced oversupply.

Mohammad-Ali Khatibi said the market is oversupplied and that demand for oil from OPEC is expected to be around 31 million bpd in the first quarter of 2009, compared with current output of around 32.5 million bpd.

"Oversupply cannot continue for a long period. It will definitely have an impact on the price and on investments in the oil industry,” Khatibi told Reuters by telephone on Tuesday.

The Iranian official urged OPEC members to consider a two-step plan to cut supplies at its Vienna meeting next week.

Khatibi said as the first step the members, that are pumping above their informal targets, should cut back to the agreed levels, explaining that this step would bring output down by 500,000 to 700,000 bpd.

He said the second step which is to begin a formal cut in production could be left until the producer group meet again in Algeria in December.
MGH/PA