Saudi Arabia told major customers it was reducing supplies substantially next month in a move that could bring the kingdom's output below its implied OPEC target of 8.47 million barrels per day.

"There are quite severe cuts -- they are going to be seriously cutting back," a trader with one major customer said.

U.S. crude jumped 96 cents to $43.03 a barrel by 2:07 p.m. EST (1907 GMT) after touching a session high of $46.17. London Brent crude traded up 55 cents to $42.08 a barrel.

OPEC next meets on December 17, and the group is widely expected to agree to more output cuts. Slumping demand in the United States and other developed economies has knocked crude down sharply from record highs over $147 struck in July.

A U.S. Energy Information Administration report this week forecasting the first contraction in world oil demand since 1983 added to expectations that OPEC will deepen cuts.

"This news about the Saudis getting ready to make its cut confirms what appears to be a foregone conclusion that indeed, the group will cut some more," Phil Flynn, analyst at Alaron Trading in Chicago, said.

Earlier, crude came under pressure as U.S. inventory data showed rising fuel stocks in the world's top consumer as demand slumps.

Distillate stocks rose by 5.6 million barrels in the week to December 5, according to Energy Information Administration, while gasoline stocks gained 3.8 million barrels. Crude inventories rose slightly.

Total U.S. product demand fell 6.1 percent over the past four weeks against year-ago levels. U.S. gasoline demand is expected to decline more sharply this year and next than in any other two-year period since 1979-1980, the EIA said.

China's crude imports in November hit their lowest this year as refiners in the No. 2 oil consumer reined in buying due to brimming storage and weakening demand.

Russia's energy minister on Wednesday said OPEC members were preparing a "significant cut" in oil production, and that Russian output was likely to decline in 2008 despite government attempts to stimulate production.

(Reporting by Matthew Robinson, Robert Gibbons, Gene Ramos in New York; Christopher Baldwin and David Sheppard in London and Denis Dyomkin in Moscow; Editing by Marguerita Choy)