LONDON - WORLD oil prices rallied from 17-month lows on Tuesday, after the Opec crude exporters' cartel warned it could slash production further and as the US dollar retreated against the euro.

New York's main contract, light sweet crude for December delivery rose 1.81 dollars to 65.03 dollars (S$97.89) a barrel in electronic deals on Tuesday, after sliding to 61.30 on Monday - a level last seen in May 2007.

Brent North Sea crude for December was 1.29 dollars higher at 62.70. On Monday, the contract had hit to 59.02 dollars per barrel, which was the lowest point since February 2007.

The Organisation of Petroleum Exporting Countries (Opec) could cut output again if prices keep falling despite an output reduction agreed at an emergency meeting in Vienna last week, the secretary general of the cartel said on Tuesday.

Opec Secretary General Abdalla Salem El-Badri also said that the cartel could hold a new emergency meeting before its next scheduled meeting in December.

'We will have to wait and see how the market will react (but) if this problem continues then we will have another cut,' Mr El-Badri told reporters on the sidelines of an oil conference in London.

'If the situation deteriorated to the point where we had to have another meeting before Algeria we will do that,' he said, referring to the next scheduled Opec meeting in Oran, Algeria, on December 17.

Asked what would be a fair price for a barrel of oil, he said 'something in between' the record high of more than 147 dollars reached in July, which he said affected demand, and current price levels of around 60 dollars, which he said would affect investment.

Britain has meanwhile cancelled plans for a summit of leaders from oil producer and consumer countries in December, Mr El-Badri added.

Opec decided last Friday to slash crude output by 1.5 million barrels per day to 27.3 million bpd starting in November, as it sought to shore up prices and protect revenues.

But the market continued to fall under 60 dollars on Monday, with Opec's decision to cut supply at a time of global financial turmoil seen as hurting already weak energy demand, dealers said.

The price of crude oil has more than halved since striking record highs above 147 dollars per barrel on July 11 on supply concerns.

'The group has already indicated that it could reduce its supplies further, given that the latest cut is having little effect on the market,' said Mr Nimit Khamar, oil market commentator at the Sucden brokerage in London.

Analysts at energy consultancy John Hall Associates said prices would head higher on speculation that Opec could cut back production levels.

'Upward pressure may well stem from... any reassessment of Opec's decision last Friday to cut output,' they wrote in a note to clients.

'Indeed, if prices continue to fall further then it is not inconceivable that the group could meet ahead of its scheduled session in Oran, Algeria and decide to cut output further.'

The crude market also won support on Tuesday as the US currency dipped against the European single currency. A weaker US unit means that dollar-priced commodities like oil become cheaper for buyers holding stronger currencies. -- AFP