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Oil prices climb on eve of OPEC meet

LONDON - Oil prices rose on Thursday, pulling away from 16-month low points before an OPEC meeting which was expected to cut oil output to shore up prices despite strengthening winds of recession, dealers said.

The market had fallen heavily on Wednesday on news that demand for crude was flagging in major consumer the United States, the world's biggest energy consumer.

On Thursday, Brent North Sea crude for December delivery gained 1.38 dollars to 65.90 dollars per barrel. Brent had hit a low of 63.96 the previous day that was last witnessed in March 2007.

New York's main contract, light sweet crude for December delivery, rose 1.37 dollars to 68.12 dollars a barrel on Thursday, after touching 66.20 dollars on Wednesday -- last seen in June 2007.

‘Crude prices were higher (on Thursday) following yesterday's hefty losses and on the increased possibility that OPEC could cut by more than the 1.0 million barrels per day widely expected by market participants,’ said Sucden analyst Nimit Khamar in London.

The Organisation of the Petroleum Exporting Countries (OPEC) meets in Vienna on Friday with the global financial system facing its worst crisis since the Great Depression.

Prices have more than halved since striking record high points above 147 dollars per barrel in July, as the market has been shaken by slowing global growth and weaker energy demand.

‘The market focus today (Thursday) and particularly tomorrow will be on the OPEC emergency meeting being held in Vienna,’ added Barclays Capital analysts.

‘Indicating the inevitability of a substantial cut, Chakib Khelil, the OPEC president, commented yesterday that ‘the stocks are very high... some of us are not able to sell the crude.'‘

The US Department of Energy revealed on Wednesday that American crude oil reserves jumped 3.2 million barrels to 311.4 million barrels in the week ending October 17.

That beat market expectations for a smaller increase and highlighted a sharp slowdown in US energy demand.

‘The US inventory report showed that the demand for oil is down by almost 10 percent for the year,’ noted BetOnMarkets analyst David Evans.

‘Analysts are now estimating that OPEC would need to cut its output by more then 1 million barrels per day in order to reverse the recent (price) losses.

‘We believe that oil might actually touch 60 dollars per barrel before the end of the month.’

OPEC hardliners stepped up pressure on Thursday for an oil production cut to shore up prices and protect their precious revenues, while the world heads into a recession.

Iran's oil minister Gholam Hossein Nozari highlighted the split within the group over the collapse in price when he called for a two-million-barrel a day production cut as he arrived in Vienna late on Wednesday.

‘Two million will stabilise’ the market, Gholam Hossein Nozari told reporters. Libya, Venezuela and Qatar have also called in recent days for a cut.

But Western leaders oppose such a move, with British Prime Minister Gordon Brown saying any reduction would be ‘scandalous’. And Gulf states led by Saudi Arabia are expected to oppose any major production cuts, analysts said.

Kuwait's Oil Minister Mohammad Al Olaim said OPEC must take the global financial crisis into account when deciding its action.

OPEC produces 40 percent of the world's oil and its official output quota stands at 28.8 million barrels per day.