VIENNA, Austria (AP) - Fearing a coming decrease in demand, OPEC lowered its oil output ceiling by 3.5 percent in a surprise pre-emptive move that caused crude futures to surge more than $1 a barrel.

The Organization of Petroleum Exporting Countries defied expectations on Wednesday and lowered its output ceiling by 900,000 barrels a day to 24.5 million barrels starting in November.

The cut startled the market, where oil futures jumped more than $1 a barrel.

OPEC defended its decision as an effort to keep prices from plunging when demand slackens early next year. Some analysts also said the cut would have little impact on the prices consumers pay for heating oil and gasoline.

OPEC reached the agreement at its Vienna headquarters in a meeting that included Iraq for the first time since the toppling of Saddam Hussein and despite earlier objections from Venezuela. Iraq is a founding member of OPEC, which pumps about a third of the world's crude.

Claude Mandil, head of the Paris-based International Energy Agency, a watchdog for major oil importing nations, expressed disappointment at the decision, which came ahead of the busy winter heating oil season in the northern hemisphere.

"Given the continued weakness in the world economy, OPEC's strategy to maintain prices at persistently high levels can't contribute to a sustained recovery and return to global economic growth," Mandil said in a statement.

White House spokesman Scott McClellan, with President Bush in New York, would not comment directly on OPEC's decision but said the economy depends on stable oil supplies and prices.

OPEC was taking pre-emptive action to try to keep prices stable before an expected dip in seasonal demand in the first quarter of 2004, the group's spokesman Omar Ibrahim said at a news conference.

At current output levels, OPEC predicts that the daily supply of crude will outstrip demand by 2.5 million barrels by next April. Iranian Oil Minister Bijan Namdar Zanganeh called the cut a possible "first step" and did not rule out another reduction later in the year.

"It is better that we start before we witness a very bad situation in the market," he told reporters before the group's oil ministers met in private to approve the cut.

OPEC also wants independent, non-OPEC producers, like Russia and Norway, to take "concrete measures" to restrain their own output, Ibrahim said, although the cartel is not making its cut conditional on a their cooperation as it did in December 2001.

A 14 percent slide in crude prices this month and expectations of a build up in oil inventories compounded OPEC's fears of a further softening of the market.

Iraq's gradual return to the market was another factor. Zanganeh noted that a cut of 900,000 barrels would return OPEC's output target to what it was until April, when the war in Iraq removed that country temporarily from the market.

In a symbol of the growing acceptance of Iraq's U.S.-backed leadership, the newly installed Iraqi oil minister, Ibrahim Bahr al-Uloum, took his place between counterparts from Kuwait and Iran at the U-shaped table in the OPEC Secretariat.

Iraq did not seek a production quota of its own. It only produces about 1.8 million barrels of oil a day - 700,000 barrels less than before the U.S.-led war started on March 20. It exports some 900,000 barrels a day, al-Uloum said in a separate news conference.

"When Iraq returns to normal production, we will discuss with Iraq how to accommodate them. ... Give them time, and then we will discuss this," OPEC President Abdullah bin Hamad al-Attiyah said.

OPEC wants to keep the price of its benchmark blend of crudes stable within a targeted range of $22-$28 a barrel. The benchmark price stood at $25.14 on Tuesday, the most recent day for which OPEC calculated it.

Crude oil futures soared on reports about OPEC's planned decision. Contracts of U.S. light, sweet crude for November delivery rose $1.11 to settle at $28.24 a barrel on the New York Mercantile Exchange. November contracts of North Sea Brent crude rose $1.15 to settle at $26.67 a barrel on the International Petroleum Exchange in London.

Tor Kartevold, a special adviser on the oil market for Norway's state-owned company Statoil, said OPEC's cut would have little impact on consumers. It was obvious that the market would weaken in the fourth quarter unless OPEC acted soon to scale back supplies, he said.

"I think they will have to cut further, possibly later this year," Kartevold said.

Other analysts noted that heating oil prices were more sensitive to a sudden cold snap than to OPEC production cuts.

The group plans to meet again Dec. 4 to reassess market conditions.