OIL prices slumped back below US$71 a barrel yesterday as a stronger dollar overshadowed expectations of a sizable OPEC output cut and led investors to shed commodities bought as an inflation hedge.

The dollar muscled higher against rival currencies as credit market conditions eased some and on speculation that the US government might roll out another stimulus package in an effort to push the economy out of a deep downturn.

Investors often buy commodities like crude oil as an inflation hedge when the dollar weakens and sell those investments when the greenback rises.

Light, sweet crude for November delivery fell US$3.36 to settle at US$70.89 on the New York Mercantile Exchange. On Monday, the contract rose US$2.40 to settle at US$74.25 a barrel.

Crude oil is down 52 percent from its all-time peak of US$147.27 reached July 11.

In London, December Brent crude fell US$2.31 to settle at US$69.72 a barrel on the ICE Futures exchange.

Alarmed by the rapid slide, the Organization of Petroleum Exporting Countries, which controls 40 percent of the world's oil supply, is holding an extraordinary meeting Friday in Vienna. OPEC's president, Chakib Khelil, said Sunday the group is planning to announce an output reduction that analysts believe could total at least 1 million barrels a day.

But experts are divided over how much impact on OPEC cut will have on prices. Some believe waning global demand for energy will push prices as low as US$50 a barrel, while others say a significant supply reduction could halt the downward the momentum.

'If OPEC does cut production, prices could return to the upside over the next three to six months,' said Costanza Jacazio, an oil analyst with Barclays Capital in New York.

She said tighter global supplies could eventually push prices back toward the US$90 range, a level believed to be favored by several OPEC members including Iran and Venezuela.