The recent fall in oil prices, which this week saw the cost of a barrel of crude oil drop below $100 (£57) for the first time in almost six months, could prove short-lived after Opec today announced it was to cut production.

Speaking after a meeting of the cartel yesterday, Opec president and Algerian energy minister Chakib Khelil said that the group had agreed to cut output by 520,000 barrels a day with immediate effect.

The price of Brent crude rallied to more than $101 a barrel having briefly dropped below the $100 mark for the first time since April. Light, sweet crude similarly rose to above $104 a barrel from a $102 in earlier trading.

The price of oil on the New York Mercantile Exchange has fallen nearly 30 per cent in the past month from a high of $147 (£83) as the economic slowdown has stifled demand.

The falling price prompted Opec to conclude in a statement that the global market is now "over-supplied" and needs shoring up through a restriction of supply.

However, the impact of Opec's announcement on prices was dampened after the International Energy Agency (IEA) released a new report downgrading its predictions for oil demand through 2008 and 2009.

The IEA said that the economic downturn being experienced by the US and Europe meant that oil demand during 2008 would rise by just 0.8 per cent on 2007 levels, while demand in 2009 would increase by just one per cent.

The monthly report also noted that high oil prices were beginning to impact business and consumer behaviour, prompting motorists to cut down on their number of journeys and embrace fuel-efficiency measures.

It noted that this change in behaviour was particularly apparent in the US, where falling demand for oil "only reinforces the view that high prices are beginning to play a central role in determining demand".