Oil jumps as OPEC surprises with 1.2 mln bpd cut

SINGAPORE, Oct 20 (Reuters) Oil prices leapt more than 1 percent to above a barrel on Friday after OPEC unexpectedly increased the scale of its first output cut in over two years to 1.2 million barrels per day, and some hinted at more to come.

U.S. light, sweet crude was up 70 cents at .20 a barrel by 0049 GMT, adding to Thursday's 85-cent gain and extending a recovery from last week's 2006 low of .22 a barrel.

London Brent crude rose 53 cents to .40 a barrel.

OPEC's agreement early on Friday to cut more than the 1 million bpd of output that had been widely discussed over the previous two weeks sent prices higher. The curbs, the group's deepest since January 2002, will cut 4.3 percent from its September production to 26.3 million bpd from Nov. 1.

''It was a surprise. It shows the determination of OPEC,'' said Tetsu Emori, chief strategist at Mitsui Bussan Futures Ltd. in Tokyo. ''They obviously wanted to send a message to the market.'' OPEC, which accounts for about a third of the world's crude, said in a statement after the meeting in Doha that an oversupply of oil had destabilised the market.

Some ministers said a further cut of 500,000 bpd could follow when OPEC next meets in the Nigerian capital Abuja in December to address high fuel stocks in consumer countries, particularly the United States, and a projected drop in demand for OPEC oil in 2007.

''This is not the end of the road because we have another meeting coming up,'' Saudi Oil Minister Ali Al-Naimi told Reuters. He said the world's leading exporter fully supported the OPEC plan and that customers had already been notified of the cuts.

Ministers' failure to speak with one voice in the weeks leading up to the hastily arranged talks had deepened oil's precipitous slide from a mid-July peak of .40 a barrel.

To sidestep the issue of quotas and market share that analysts said had begun to cost the cartel credibility, OPEC published only a list of individual cutbacks without giving the basis for the calculation or new national limits.

OPEC's biggest member Saudi Arabia, will shoulder around 32 percent of the cut, amounting to 380,000 bpd.

Iran, Kuwait and Venezuela will cut at least 100,000 bpd.

For a full list of planned cuts click: Analysts said OPEC's next task was to prove to the market it really was curbing supplies.

''The group must provide the market with a credible scheme or prices may fall further,'' ABN AMRO analyst Geoff Pyne said.

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