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UPDATE 7-Oil slips as OPEC prepares to extend output cuts

* OPEC agrees to extend output cuts for nine more months

* Saudi, Iran say deeper OPEC, non-OPEC cuts not needed

* Oil prices fall as hopes for deeper, longer cuts fade

* Some investors had wanted further production cuts

* Rising U.S. output threatens to undermine OPEC-led cuts (Updates detail, prices, comment; paragraphs 1-4, 8-9)

LONDON, May 25 (Reuters) - Oil prices fell on Thursday as OPEC prepared to extend limits to production by nine months to March 2018 in an attempt to drain a glut that has depressed markets for almost three years.

The cuts are likely to be shared again by a dozen oil exporters outside OPEC led by top producer Russia, which reduced output in tandem with the Organization of the Petroleum Exporting Countries from January.

OPEC's cuts have helped to push oil back above $50 a barrel this year, giving a fiscal boost to producers, many of which rely heavily on energy revenues and have had to burn through foreign-currency reserves to plug holes in their budgets.

Brent crude oil dropped as much as $1.24 a barrel to a low of $52.72 on Thursday before regaining ground to trade 20 cents lower at $53.76 by 1350 GMT. U.S. light crude was 20 cents lower at $51.16.

Both benchmarks were still up over 15 percent from May lows.

OPEC and other producers had been widely expected to agree to extend a cut in oil supplies of 1.8 million barrels per day (bpd) until the end of the first quarter of 2018.

OPEC's current deal, agreed at the end of last year, only covers the first half of 2017.

Saudi Arabia's energy minister, Khalid al-Falih, said ministers did not see a need to reduce oil output further:

"There have been suggestions (of deeper cuts), many member countries have indicated flexibility but ... that won't be necessary," Falih said.

That disappointed some investors.

"A nine-month extension of the output cuts is already baked into prices," said Olivier Jakob, energy markets analyst at Swiss consultancy Petromatrix. "This shows there's not much more OPEC can do."

"It is a disappointment that OPEC hasn't done more to balance the markets," he added.

Amrita Sen, analyst at consultancy Energy Aspects agreed.

"Nine months was priced in," Sen said.

Energy consultancy Wood Mackenzie said keeping existing oil output at current levels for another nine months would result in a 950,000 bpd production increase in the United States, thus undermining OPEC's efforts to balance supply and demand.

U.S. oil production <C-OUT-T-EIA> has already risen by more than 10 percent since mid-2016 to more than 9.3 million bpd as drillers take advantage of higher prices and the supply gap left by OPEC and its allies. (Additional reporting by Henning Gloystein in Singapore; editing by Jason Neely, Edmund Blair and Pritha Sarkar)