PHOENIX (Arizona) - OIL prices rebounded on Friday in what some market analysts believed was only a brief pause for steadily declining crude prices.

Awful holiday retail sales, job uncertainty and shrinking global trade all suggest that demand for energy from both businesses and consumers will continue to fall into next year.

'By Tuesday or Wednesday, we could easily see crude oil roughly US$3 below what it is right now,' said Mr Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.

New evidence that Opec members had cut production and a weaker dollar boosted crude prices on Friday in light trading.

Light, sweet crude for February delivery rose US$2.36, more than 6 per cent, to close at US$37.71 (S$54.61) a barrel on the New York Mercantile Exchange. Trading was closed on Thursday for Christmas.

In London, February Brent crude rose US$1.76 to settle at US$38.45 a barrel on the ICE Futures exchange.

Tumbling crude prices have led to enormous declines in the price of retail gasoline.

At the pump, retail gas prices fell six-tenths of a penny overnight to a new national average of US$1.642 a gallon (43 cents a litre) on Friday, well below the year-ago average of US$2.981 a gallon, according to AAA and the Oil Price Information Service.

'We're paying about a billion dollars per day less than we were in July' for gasoline, said Mr Tom Kloza, publisher and chief oil analyst at Oil Price Information Service. 'We could probably bail out some banks and maybe even some of the auto companies with the savings.'

The Organisation of Petroleum Exporting Countries (Opec), which accounts for about 40 per cent of global supply, has announced crude production cuts totalling more than 4 million barrels per day as it tries to stop the decline in prices. Opec members, however, have a history of ignoring announced quotas and crude traders waited for concrete evidence that the 13-nation group was tightening the spigot.

Analysts pointed to a release from the United Arab Emirates advising clients that it would reduce supply almost immediately. The state-owned Abu Dhabi National Oil Company said it would cut production of some grades of crude by as much as 15 per cent next month.

'For now, at least Saudi Arabia and the United Arab Emirates seem to be fully complying with the cuts,' said analyst Olivier Jakob of Petromatrix in Switzerland.

Opec may meet again in Kuwait City on Jan 19 to discuss further production cuts. The group's next official meeting is March 15 in Vienna.

Investors in recent months have ignored supply cuts from Opec, with demand issues clearly driving the market. What's kept crude prices at four-year lows is the steady drumbeat of gloomy economic news that shows consumers aren't spending like they used to.

The latest comes from a preliminary report by MasterCard SpendingPulse, which said retail sales fell between 5.5 per cent and 8 per cent during the holiday season, compared with last year.

Excluding auto and gas sales, they fell 2 per cent to 4 per cent, according to SpendingPulse.

SpendingPulse is a division of MasterCard Advisors that tracks total sales paid for by credit card, checks and cash.

Crude has given up 70 per cent of its value since July, and this month alone it has fallen by more than US$17 per barrel, a 30 per cent decline.

Mr Kloza said he'll know that crude prices are poised for a sustained rebound when global demand matches last year's levels for several weeks in a row.

'Before you turn the corner, you need to get to the corner,' Mr Kloza said. 'And right now we're seeing gasoline demand running about 3 to 5 per cent behind year-ago levels.

Investors eyed more evidence that plummeting consumer demand from the US and Europe is undermining growth in export-dependent Asia, as production at major Japanese manufacturers fell by its largest margin ever in November.

Japanese industrial production fell 8.1 per cent in November from a month earlier, the largest drop since the government began measuring such data in 1953, the Ministry of Economy, Trade and Industry said on Friday.

The decline followed a 3.1 per cent drop in October, and the government expects another 8 per cent plunge in December.

'These are pretty ugly figures that show the recession deepened in Japan,' said Mr Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. 'I don't see any catalyst to bring crude higher. We'll likely test US$30.'

Many companies will likely report dismal earnings for the fourth quarter and may use the lowered expectations to include massive writedowns or one-time charges, Mr Moltke-Leth said.

'I think a lot of CEOs want to put everything bad into the fourth quarter because the market expects it to be bad so why not put everything you can in there,' he said. 'There's going to be a lot of bad corporate news during the next few weeks, and that's going to reinforce the demand destruction theme for crude.'

In other Nymex trading, gasoline futures rose 5.17 cents to settle at 88.4 cents a gallon. Heating oil gained 4.67 cents to settle at US$1.245 a gallon while natural gas for January delivery fell 8.4 cents to settle at US$5.826 per 1,000 cubic feet. -- AP