Dec. 18 (Bloomberg) -- Crude oil rose from a four-year low on speculation OPEC’s record output cut will reduce surplus supplies next year.

OPEC yesterday agreed that the group’s 11 members with quotas will trim current production by 9 percent in an attempt to stabilize prices. Russia and Azerbaijan signaled they be willing to reduce supplies as well. Global stockpiles could fall as much as 3 million barrels a day in the first quarter of next year, according to Petromatrix GmbH.

“The cuts will be more dramatic than the demand slump,” said Eugen Weinberg, a senior commodity analyst at Commerzbank AG in Frankfurt. “From the fundamental point of view, oil is relatively cheap and should stabilize at these levels.”

Crude oil for January delivery rose 25 cents, or 0.6 percent to $40.31 a barrel in electronic trading on the New York Mercantile Exchange today at 1:21 p.m. London time. It earlier rose as much as 2.1 percent to $40.90 a barrel.

The contract expires tomorrow. The more actively traded February contract traded up 0.2 percent at $44.71 a barrel. Prices dipped to a four-year low yesterday after U.S. crude and fuel stockpiles gained and on concern OPEC members may not comply with agreed cutbacks.

“We will have to be extremely pessimistic about global demand to carry on with $40 a barrel,” said Gareth Lewis- Davies, analyst at Dresdner Kleinwort Group Ltd. in London. Oil at $40 a barrel “is too low and prices will recover to about $80 a barrel in the middle of next year,” he added.

Budget Shortfalls

OPEC members agreed to trim current production by 2.46 million barrels a day to 24.845 million barrels a day from the start of next year. Oil prices have slumped more than 70 percent since reaching a record $147.27 on July 11, cutting oil revenue and creating budget shortfalls for OPEC nations.

Global oil inventories may decline as much as 3 million barrels a day in the first quarter of next year if OPEC members comply fully with the group’s decision to cut production, Olivier Jakob, managing director of Petromatrix GmbH in Switzerland, said yesterday.

“At 100 percent OPEC compliance this would translate to a 3 million-barrels-a-day stock draw in the first quarter,” he said. With compliance of 70 percent, the decline in inventories would be 1.7 million barrels a day.

Assuming crude supplies remain the same from Iraq and Indonesia, the two OPEC members not included in the production target, total OPEC output will be 2.2 million barrels a day lower than the demand for its crude, Collins Stewart said in a research note today.

IEA Forecast

The International Energy Agency last week cut its oil demand forecast for next year to 86.3 million barrels a day as the global recession spreads. Still, it expects consumption to rise by 400,000 barrels a day, or 0.5 percent, from this year, it said in its monthly oil report.

“Continuing falls in OPEC output combined with weak and falling non-OPEC output, ultimately should counteract a fall in demand,” Barclays Capital analysts said in a note yesterday. “Our belief is that OPEC would be covered for an even greater demand fall.”

Brent crude oil for February settlement traded at $46.23 a barrel, up 70 cents, or 1.5 percent, on London’s ICE Futures Europe exchange at 1:23 p.m. London time. The contract earlier rose as much as $1.15, or 2.5 percent, to $46.68 a barrel.

To contact the reporter on this story: Alexander Kwiatkowski; in London at akwiatkowsk2@bloomberg.net

Last Updated: December 18, 2008 08:30 EST