Oil jumps $1 as OPEC surprises with output cut

* U.S. crude futures jump $1 after OPEC agrees effective cut

* OPEC reverts to 28.8 mln bpd 2007 quota

* OPEC decision cuts 520,000 bpd vs July production

SEOUL, Sept 10 (Reuters) - Oil prices jumped more than $1 a barrel on Wednesday, reversing early losses after OPEC unexpectedly agreed to effectively cut production by just over 500,000 barrels per day (bpd) from July levels.

Most analysts had expected the producer cartel to maintain formal targets at its meeting in Vienna, although some had suggested they could tighten compliance in order to help stem a near 30 percent slump in oil prices since July.

U.S. crude for October delivery was up 54 cents at $103.80 a barrel by 0147 GMT, reversing earlier losses of more than $1 a barrel after OPEC decided to trim its production ceiling to 28.8 million barrels per day (bpd).

London Brent crude rose 46 cents to $100.80 after briefly dipping below $100 for a second day. Prices hit their lowest in five months on Tuesday.

"The boys at OPEC have thrown a surprise by cutting production.... I am amazed they have cut, and that the market reaction has been so lukewarm so far," said Edward Meir, analyst at brokers MF Global in New York.

"I expect that reaction to intensify as the day goes on.

OPEC President Chakib Khelil said after the nearly five-hour meeting that he still saw surplus oil supply building on the market by the end of the year and increasing in the first months of 2009.

"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," said Susumu Ogasawara, a manager at Ace Koeki Co Ltd in Tokyo.

"The focus will shift back to falling demand and concerns about the global economy to pressure oil prices."

Later in the day traders will seek direction from U.S. inventory data, expected to show a fall in U.S. crude stocks by 4.4 million barrels in the week to Sept 5 after Gustav shut down fields, according to a Reuters poll of analysts.[EIA/S]

Gasoline stocks were seen falling by 4.2 million barrels and distillates by 2.7 million barrels in the data. (Reporting by Angela Moon; Editing by Louise Heavens)