INSTANT VIEW: OPEC agrees effective 520,000 bpd output cut

(Reuters) - OPEC unexpectedly agreed on Wednesday to revert to its 2007 production limit of 28.8 million barrels per day, a move that the group's president said would cut production by 520,000 bpd, or about 1.8 percent, from July levels.

Many analysts had expected OPEC to retain existing production targets at its meeting in Vienna, but some ministers and analysts had suggested that they could agree to tighten compliance.

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* MARKET REACTION:

* U.S. crude oil prices climb more than $1 a barrel, reversing early losses

* LME copper rises $42 or 0.6 percent to $6,857 as commodity investors take heart in oil's rally

* Spot gold pares early losses after touching a near 11-month low of $762.55 to stand at $770.50, down 0.8 percent

KEY STORIES:

> TEXT-OPEC communique from Wednesday meeting

> New OPEC ceiling a cut from July output-Khelil

> Oil jumps $1 as OPEC surprises with output cut

KEY POINTS:

* OPEC COMMUNIQUE-OPEC OUTPUT TARGET 28.8 MLN BPD

* OPEC COMMUNIQUE-OPEC TO MEET NEXT DEC 17 IN ORAN, ALGERIA

* OPEC PRES SAYS NEW OPEC TARGET IS 520,000 BPD DECREASE

FROM OUTPUT IN JULY 2008

* OPEC PRESIDENT SAYS MEMBERS WILL ADJUST OUTPUT OVER NEXT 40 DAYS

* OPEC PRES - 28.8 MLN BPD OPEC TARGET EQUIVALENT OF DOHA

AGREEMENT LEVELS WITH ADDITION OF ECUADOR

* VENEZUELA SAYS OPEC GOES BACK TO 28.8 MLN BPD OUTPUT FROM 29.67 MBPD CURRENT TARGET

COMMENTARY:

JONATHAN KORNAFEL, ASIA DIRECTOR, HUDSON CAPITAL ENERGY,

SINGAPORE

"I think it's a bit of a surprise. Most people were expecting OPEC to just pare back their production to their original target levels of 29.67 million barrels per day."

"But to actually cut the quota level to 28.8, I think it's a bit of a surprise. It certainly shows that OPEC is not afraid to defend a $100 price level. I think that is exactly what they're doing.

NUNAN TONY, ASSISTANT MANAGER OF RISK MANAGEMENT,

MITSUBISHI CORP, TOKYO

"I support the move by OPEC. The demand from OECD countries is falling and Saudi had increased production by 500,000 bpd or so. OPEC had to make the change. The market was expecting OPEC to maintain quota, but unofficially change production which is what they had done. But I didn't expect the organization to come out and officially say that hey will cut by 520,000 bpd.

"I guess this has sparked the instant move (in prices) but I don't think the short term trend of decreasing demand from OECD will change, and therefore will have major changes in oil prices."

SUSUMU OGASAWARA, MANAGER AT ACE KOEKI CO LTD, TOKYO

"OPEC is basically cutting the amount which Saudi had increased. Oil prices jumped initially after the news but we are not surprised by the amount of the cut. I don't think the cut can actually stop the current downtrend in the oil market.

"Prices should come under downward pressure again once the market factors-in this news. The focus will shift back to falling demand and concerns about the global economy to pressure oil prices."

TOBIAS MERATH, HEAD OF COMMODITIES RESEARCH, CREDIT SUISSE

"We expected OPEC to make a silent adjustment in production when oil reaches $100. Now, there mission is to control rising inventory levels. They want to achieve more compliance now -- members to be more strict and adhere to their production quota now that prices are easing."

KEN HASEGAWA, AN ANALYST AT BROKER NEWEDGE, TOKYO.

"The quota was left unchanged, but to observe the quota is new, although this had been within the expectations."

"The market is reacting to this right now. The NYMEX is expected to hover around $105-6 as a base, taking into account economic fundamentals and supply-demand. Economy is still unstable, so if it recovers today, oil may fall below $100 by the end of this month."

EDWARD MEIR, C&E ANALYST AT MF GLOBAL

"The boys at OPEC have thrown a surprise by cutting production. Oil is bouncing pulling metals with it. I am amazed they have cut, and that the market reaction has been so lukewarm so far. I expect that reaction to intensify as the day goes on.

"This could have some legs, with oil up $4-5 and we could see copper back above $7,000 a tonne."

MARK PERVAN, SENIOR COMMODITIES STRATEGIST AT ANZ

"I think this was not to dramatically bring down prices but rather to slow down the momentum. There was a lot of momentum in the past month or so for prices to fall down such as the strong dollar.

"The cut, which is not very much, is just a reminder to the market that they are capable of making changes."