UPDATE 1-Ecuador to decide on OPEC meet after supply cuts

(Adds suspending of output by Eni's Agip Oil unit)

QUITO, Dec 29 (Reuters) - Ecuador will monitor oil markets after OPEC makes effective its January output cuts to decide whether to back a cartel emergency meeting to stabilize oil prices dragged down by excessive supply, Oil Minister Derlis Palacios said on Monday.

Ecuador has said it will lower the oil output of private companies to comply with OPEC's biggest-ever supply cut agreed earlier this month. Ecuador, which is a marginal producer at 500,000 barrels per day, has to lower output by 40,000 bpd.

The output cut will include suspending all production from Italy's Eni unit Agip Oil (ENI.MI) in the Andean country. The company has a service contract and extracts around 20,000 bpd.

Palacios said Eni's service contract, in which the company is paid a fee to extract oil, is not benefiting the country under current low oil prices and the government could opt to end the deal.

Oil officials and Eni executives will meet later this week to decide on the contract, Palacios said. (Reporting by Alonso Soto; Editing by Christian Wiessner)