Malaysia is committed to cutting fuel subsidies in the face of rising oil prices so the government can free up funds for development projects, Trade Minister Rafidah Aziz said today.

"The government has said that the mechanism to fix the price will be reviewed so that the oil price will reflect the prevailing oil price in the international market," she told reporters.

"And also to reduce the government's financial burden so that the money can be used for the benefit of the people," she said on the sidelines of the ruling Umno's annual gathering.

Rafidah said that while Malaysia was a net oil exporter, high oil prices had an adverse impact on the economy because it had to import more fuel.

"The rise in prices cannot be avoided if oil prices surge," she said.

The minister also said that low retail fuel prices in Malaysia compared to its neighbours had led to smuggling of the commodity across its borders.

The Malaysian government has raised petrol and diesel prices three times since last October but prices still remain low compared to the rest of the region.

Subsidies for petroleum cost Malaysia RM4.8 billion last year and the government has said that they will eventually be scrapped.

Oil prices rose marginally in Asian trade on Wednesday as the market focused on the US hurricane season and US inventory data due out later in the day, dealers said.

New York's main contract, light sweet crude for delivery in August, was at 57.61 dollars a barrel, up 15 cents from its close of 57.46 dollars in the United States overnight.