Oil: Price rises on Opec's first output cut since 2004

LONDON - Oil rose on Thursday after Opec officials said the producer group will cut output by 1 million barrels per day as soon as possible to prop up prices.

Top world exporter Saudi Arabia will lower production by 300,000 barrels per day (bpd) as part of the plan, an Opec delegate said. Oil has slid from a peak of US$78.40 ($118) in July, alarming Opec, partly due to brimming inventories.

"Prices would have kept coming down unless we saw concrete action by Opec," said Adam Sieminski, analyst at Deutsche Bank. "The build in inventories is telling you the market is pretty well supplied."

US crude rose 9 cents to US$59.50 a barrel by 1714 GMT. London Brent advanced US32c to US$59.54.

The plan by the Organisation of the Petroleum Exporting Countries, which pumps more than a third of the world's oil, expands on token supply cutbacks announced last week by Nigeria and Venezuela.

"The goal now is to cut actual oil production by 1 million barrels daily as soon as possible but the exact date is still being worked out," the delegate said.

Another Opec source said the group would meet in Vienna on October 18-19 to finalize a deal provided all members agreed on the need for a substantial cut of at least 1 million bpd.

The reduction will be Opec's first output cut since April 2004. The group's official output limit has stood at 28 million bpd for more than a year.

All Opec countries apart from Iraq, exempt from Opec supply quotas, and Indonesia, a net importer, are to take part in the supply curbs, the senior delegate said.

Opec's plan dismayed the United States, the world's top oil consumer. US Energy Secretary Sam Bodman said he did not want Opec to cut daily output by 1 million barrels.

"We still need oil for sure. We still need all the oil we can get," Bodman told Reuters in a telephone interview.

Bodman said he plans to drive that point home in conversations with Opec oil ministers. Peak winter demand for heating fuel lies just around the corner.

Oil has come under pressure from brimming fuel inventories in the United States. Crude hit an eight-month low in New York on Wednesday.

US crude stocks rose 3.3 million barrels last week, countering expectations for a drop, while distillate supplies rose 200,000 barrels, remaining at the highest level since 1999.

The high level of global fuel stockpiles is a greater concern to Opec than the price of oil, the delegate said.

Oil also drew support from a fresh outbreak of violence in the oil-producing region of Nigeria, Africa's top producer.

The world's eighth-largest oil exporter has already shut down more than a quarter of its oil output for most of this year because of civil unrest.

- REUTERS