By Christopher Johnson LONDON (Reuters) - Oil rose by more than a dollar to nearly $45 on Wednesday ahead of an OPEC meeting in Algeria widely expected to announce a big cut in production in an attempt to halt a collapse in oil prices. A tumbling U.S. dollar after a bigger-than-expected cut in interest rates by the U.S. Federal Reserve also helped oil. Oil ministers from the Organization of the Petroleum Exporting Countries appeared to be near consensus on a cut in output of 2 million barrels per day (bpd), the biggest ever reduction ever by the producer group. U.S. light crude for January delivery, due to expire on Friday, rose $1.39 to $44.99 a barrel by 3:55 a.m. EST after having fallen to a low of $42.56 in the previous session, just off a four-year trough of $40.50 a barrel hit on December 5. London Brent crude for February delivery was up $1.61 at $48.26. Oil prices have tumbled more than $100 from the July all-time record above $147 a barrel as financial turmoil has slowed global economic growth and hit fuel demand. OPEC is desperate to halt the slide in prices. Economists say that at $40 per barrel, 11 of OPEC's 12 members, as well as Russia and Mexico, face budget deficits. But a large cut has been widely flagged by oil ministers and dealers say the move has already been priced into the market. "SELL THE FACT" "A 2.0 million bpd cut in production now runs the risk of a 'Buy the rumor Sell the fact' scenario," Rob Laughlin, analyst at MF Global said. "It would have been bullish for the market a week ago. But we have been warned to expect it now so I think the market will go up initially but then come down further." In its monthly oil market report, OPEC said on Tuesday the first drop in world oil demand in 25 years would sharply lower the need for OPEC crude in 2009, opening the door for a substantial production cut at its meeting. Russia, the world's largest non-OPEC producer, has sent a high-level delegation to observe the meeting. Its deputy Prime Minister Igor Sechin, said Russia could cut oil exports by as much as 320,000 bpd but told Reuters that cooperation with OPEC would progress only 'step by step.' Azerbaijan said it could also support any OPEC decision. But Mexico, which contributed to OPEC cuts in 1999 and 2001, said it would not weigh in this time as its oil output was already declining. OPEC has already agreed to cut output by 2 million bpd at two previous meetings, but demand has fallen faster and stocks of oil are building up. OPEC said 45 million barrels of crude oil are currently being stored at sea on oil tankers. Crude oil stocks in top energy consumer the United States are running near the top of their five-year range and forecasters expect data to show they rose by another 300,000 barrels last week, according to a Reuters poll ahead of the U.S. fuel inventory report due later in the session. (Additional reporting by Annika Breidthardt in Singapore; editing by James Jukwey)

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