Crude oil prices rose for the first time in three days as investors bought into cheap oil and OPEC majors UAE and Saudi Arabia said they would cut output to curb supplies in line with the oil cartel's decision.

Sweet light crude for February rose $1.45, or 4.1 per cent, to $36.80 a barrel on the New York Mercantile Exchange following the news. The contract was trading at $36.50 later.

North Sea Brent crude for February on the London ICE Futures gained $1.14, or 3.1 per cent, at $37.75 a barrel.

In a statement faxed to Asian consumers, state-owned UAE oil producer Abu Dhabi National Oil Co said it will cut crude oil supply in January and February.

Crude prices have fallen to less than a fourth from the July highs of around $147 a barrel. Prices fell as low as $35.13 on and closed 9.3 per cent lower at $35.35 on 24 December, the last day of trading before the Christmas holiday.

Prices of crude oil have fallen by around 33 per cent this month alone, prompting the Organisation of Petroleum Exporting Countries (OPEC) to deepen production cuts for its 11 members to a total of around 4.2 million barrels a day, compared to the September levels.

OPEC, which supplies more than 40 per cent of the world's crude oil, will limit production by at 24.845 million barrels a day, according to figures published by OPEC.

Crude prices also took cue from cut in refinery outputs in Japan amidst a recession and a rise in US inventories of gasoline and crude amidst week economic data.

Nippon Oil Corporation,Japan's largest refiner, plans to reduce output by 25 per cent in January and may continue cuts in the first three months of 2009 as demand falls.

US gasoline inventories rose 3.34 million barrels to 207.3 million barrels last week, the Energy Department said in a report.

Indian refineries, however, expect to post profits on sale of petrol, diesel, cooking gas and kerosene in the fortnight ending 31 December, after average crude oil prices have fallen nearly 3 per cent and the rupee has appreciated 3.2 per cent compared with the first fortnight of this month.