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Oil edges up after sharp fall; eyes on OPEC

(Agencies)
Updated: 2008-10-23 13:29

PERTH – Oil rose to hover above $67 a barrel on Thursday, recouping some of the previous session's 7.5 percent loss, as investors shifted their focus to a likely OPEC agreement on Friday to cut output.

A Northern Virginia Chevron gas station employee lowers the price gasoline on a signboard early in the morning of October 16, 2008. [Agencies]

Oil slumped for a second straight session on Wednesday to the lowest since June 2007 as the dollar hit a two-year high against the euro. In addition, signs of a slowdown in China -- the world's fastest-growing economy -- intensified fears of global recession.

US light crude for December delivery rose 35 cents to $67.10 a barrel by 0344 GMT, trimming early gains of as much as $1.06 as the US dollar rose.

London Brent crude rose 35 cents $64.87.

"I think it's a technical rebound following the sharp drop last night. Some would see it as a good buy especially when there is an OPEC meeting coming up tomorrow and members have called for a cut in production," said Gerard Rigby, an energy analyst with Fuel First Consulting in Sydney.

However, analysts said a rallying US dollar and growing fears of a global economic recession combined to rein in oil's early gains.

Oil has plunged more than 50 percent from its record high above $147 in July as the financial crisis cuts energy demand in the United States and other industrial countries.

Data from the US Energy Information Administration showed US product demand fell 8.5 percent over the four weeks ending October 17, compared with year-ago levels, while inventory levels continued to swell.

US crude oil inventories rose 3.2 million barrels in the week to October 17, above analyst expectations for a 2.6 million build. Distillate inventories leaped by 2.2 million barrels while gasoline inventories rose by 2.7 million barrels.

Although the Organization of the Petroleum Exporting Countries has traditionally steered away from price discussions, several OPEC members have said that an acceptable price range for oil was between $70-$90 a barrel.

Still, analysts warned that the global economic outlook could limit the impact of any oil supply cuts OPEC might agree at an emergency meeting on Friday, and the group's president said output policy would prove a difficult balancing act.

OPEC President Chakib Khelil said oil stocks are high and some member countries are finding it hard to sell their oil.

"It is a double-edged sword. If they cut supplies by too much, they could jeopardize the economic recovery. But if they don't act decisively, their economies may suffer," said Tony Nunan, assistant manager of risk management at Mitsubishi Corp in Tokyo.