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Oil prices climb after China cuts rates

disclaimer: image is for illustration purposes only
by Staff Writers
New York (AFP) Nov 26, 2008
World oil prices rebounded Wednesday after Chinese and European moves to fight the global economic downturn eased fears of a deeper crisis that cuts energy demand.

The market was also supported by the prospect of a possible OPEC output cut when the crude exporters' cartel meets this weekend in Cairo.

Light sweet crude for January climbed 3.67 dollars to close at 54.44 dollars a barrel on the New York Mercantile Exchange.

In London, Brent North Sea crude for delivery in January added 3.57 dollars to settle at 51.55 dollars a barrel.

Early gains accelerated as a rally on Wall Street suggested that the economic outlook could improve soon despite bleak reports from October.

John Kilduff at MF Global said some of the economic gloom is easing, thanks to a pledge for swift action by US president-elect Barack Obama, as well as stimulus efforts in the European Union, China and elsewhere.

In China -- the world's second biggest energy consumer -- the country's central bank announced a cut of 1.08 percentage points in its benchmark one-year rates as part of efforts to boost economic growth.

The European Commission meanwhile proposed a sweeping stimulus package worth 200 billion euros (259 billion dollars) in a bid to jolt the eurozone out of recession.

"With the EU finally conceding that inflation is not their most acute concern, China taking steps to keep their growth vibrant, and the US showing that it will keep printing money until credit markets defrost, investors should begin to feel somewhat less vulnerable," Kilduff said.

"Whether these levels will hold remains to be seen, but doubtless, few will want to be the first to test the territory below (last) Thursday's levels" below 50 dollars a barrel.

Traders also shrugged off data showing that US crude oil stockpiles surged last week -- indicating that demand had tailed off in the world's biggest energy consumer.

The Organization of Petroleum Exporting Countries (OPEC), whose member countries pump 40 percent of the world's crude, will hold an extraordinary meeting in Cairo on Saturday and could cut output in response to slumping prices.

OPEC agreed in Vienna last month to reduce production by 1.5 million barrels per day from November 1 -- but prices have since continued to tumble.

The price of crude oil has collapsed by about two-thirds since striking record high points above 147 dollars per barrel in July.

Last week, oil slumped under 50 dollars to levels not seen since early 2005.

The US government meanwhile said Wednesday that American crude stockpiles surged by 7.3 million barrels in the week ending November 21. Analysts' consensus forecasts had been for a gain of 900,000 barrels.

Trading will be shut in New York on Thursday for the Thanksgiving holiday break.

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Miami (UPI) Nov 26, 2008
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