KUALA LUMPUR - MALAYSIA on Wednesday announced another 3.9 per cent cut in petrol prices, following recent declines in world oil prices.

Prime Minister Abdullah Ahmad Badawi said the price of petrol will be cut by 10 sen to RM2.45 (S$1.02) while diesel prices will be cut by the same amount to RM2.40 effective on Thursday.

It is the second time the government has cut fuel prices since a 41 per cent hike in Jun on the back of soaring crude costs - a 5.6 per cent cut was introduced last month.

The massive rise in Jun sparked angry street protests and calls for Mr Abdullah to quit. The PM later said prices will be reviewed periodically based on the cost of oil.

Wednesday's cut comes ahead of next week's Eid al-Fitr celebrations in the mainly Muslim country.

'In the last month global oil prices have been fluctuating but on an average it is lower than the previous price average (in Aug),' Mr Abdullah said in a statement.

'The government is aware that many will be travelling back to their home towns for the festive season from this weekend,' '(We) hope that this price reduction will alleviate the people's burden, especially while celebrating Eid al-Fitr,' he said.

Jun's hike saw inflation skyrocket, with the Aug price index reaching a 26-year high of 8.5 per cent, driven by the escalating cost of food and fuel.

Opposition leader Anwar Ibrahim, who is mounting an aggressive challenge against Mr Abdullah's leadership, has promised to cut fuel prices substantially if he wrests power from the ruling coalition.