THE battle is joined, and it is a familiar one. On one side are the oil-consuming countries, benefiting from a sharp drop in prices after a sky-high summer peak of $78 a barrel.

On the other is the Organisation of Petroleum Exporting Countries (Opec). Its members have had a bonanza as oil prices have tripled over the past three to four years. They do not want to let that go.

In the past Opec has acted to push oil prices higher. Now it is threatening action to prevent them falling too much. It will be a fascinating battle, with an uncertain outcome.

The first shots were fired just over a week ago by Nigeria and Venezuela, which announced a combined cut in supply of 170,000 barrels a day.

That was greeted with a bored shrug by oil traders. Rather than stabilising the price at $60 a barrel, as the two producers had hoped, prices dropped to a seven-month low of $58.

So Opec toughened its rhetoric, announcing plans to cut production by 1m barrels a day, with the possibility of an emergency meeting to agree on it ahead of Opec’s next planned gathering in Abuja, Nigeria, in mid-December.

Edmund Daukoru, Nigeria’s oil minister and president of Opec, said: “We agree that something needs to be done. We will have to agree on how much, how soon and how we distribute it among the member countries.”

A reduction of 1m barrels a day would be equivalent to almost 4% of Opec’s output and just over 1% of global supplies.

That move had more of an impact, pulling prices back to $60 a barrel, but the jury is still out on how successful Opec can be in stabilising the price, as the evidence accumulates of healthy global stockpiles and of a slowdown in the American economy.

“The threat of reducing production looks a little bit disorganised,” said Frédéric Lasserre, head of commodities research at Société Générale in Paris. “What we are really seeing in the oil market is a reassessment by the hedge funds. It has to do with medium-term expectations and the slowdown in the American economy. They are no longer taking the view that the market is going to keep on tightening.”

Hedge funds and other institutions had taken bets on oil and natural-gas prices staying high but have begun to unwind those in light of recent falls. The sharp fall in gas prices has resulted in big losses for some funds.

Lasserre expects prices to hover around current levels for the next few weeks before falling next year to end 2007 at about $51 a barrel. He believes the real battle will come around $50, the level Saudi Arabia — the world’s biggest producer — will probably want to defend.

Lower oil prices could push down inflation and give a boost to the world economy. Simulations by HSBC show that if instead of $70 a barrel, the oil price were $50 in 2007 and 2008, it would push up UK economic growth by nearly one percentage point next year and push down inflation by 1.3 points.

Cheaper oil would also help the slowing American economy, increasing next year’s growth rate by 0.7 percentage points and 2008 growth by 0.9 points. The biggest beneficial effects would be on China, India and other emerging economies.

Not everybody is convinced, however, that oil prices have been tamed. Analysts point out that there is often weakness at this time of year — America’s “driving season” has ended and winter energy usage has not yet begun. A revival of tension over Iran’s nuclear programme and a harsh winter in the northern hemisphere could push prices back up sharply.

Analysts have revised their price forecasts down but say recent weakness may have gone too far. Mike Wittner, global head of energy-market research at Calyon, expects prices to settle in the $60-$70 a barrel range, with US West Texas Intermediate averaging $65.83 next year after $67.52 this year.

Helen Henton, head of commodity research at Standard Chartered, said: “The price has come off too much; we’re about to move into the highest season for demand. We’re looking for a price in the low $60s for the rest of the year.”

Over time, however, she expects oil to drift lower as new capacity comes on stream, with the price sliding to $45 a barrel.