* Oil above $66, tracks stock market rally
* China cuts interest rates, U.S. expected to cut
* U.S. crude, products stocks forecast to rise
(Updates prices)
By Jane Merriman
LONDON, Oct 29 (Reuters) - Oil was above $66 a barrel on
Wednesday, boosted by a surge in global stock markets on
expectations the U.S. Federal Reserve and other central banks
are poised to cut interest rates to revive global growth.
China cut interest rates for the third time in six weeks,
prompting heightened speculation of coordinated bank action on
rates. []
U.S. light crude for December delivery <CLc1> was up $3.44
at $66.17 a barrel by 1333 GMT. It touched a session high of
$66.97. On Monday, it fell to a 17-month low of $61.30.
London Brent crude <LCOc1> was up $3.72 a barrel to $64.01.
China's rate cut provided evidence that the economic
slowdown is starting to affect emerging markets.
"There's building evidence in China that the slowdown we're
seeing everywhere else is taking place there as well," said
Derek Halpenny, European head of FX research at BTM-UFJ.
Oil has fallen more than 50 percent from a record peak of
$147.27 in July, as the credit crisis has spilled over into the
real economy and dampened demand for oil in industrial
countries.
Merrill Lynch has cut its U.S. crude oil price forecast for
the fourth quarter of 2008 to $78 a barrel from $107 a barrel.
"Demand for physical commodities is tanking in many parts of
the world, with U.S. oil consumption contracting at the sharpest
rate since 1980," the bank said.
"More importantly we are starting to see signs of oil demand
slowing in emerging markets."
DEMAND IN DECLINE
Oil continued to fall last week, despite a cut in production
by the Organization of the Petroleum Exporting Countries, agreed
at an emergency meeting to try to defend prices.
The market's focus is on falls in demand across the world,
particularly in top consumer the United States, where gasoline
demand fell by 6.4 percent last week versus year-ago levels,
data from MasterCard Advisors released on Tuesday showed.
U.S. government data, due at 1435 GMT, is expected to show a
rise of 1.4 million barrels in crude stocks last week, a Reuters
poll showed. []
Distillate stocks are seen up 800,000 barrels while analysts
forecast a rise of 1.2 million barrels in gasoline stocks.
Oil and other commodities have been tracking stock markets
closely, using them as a gauge of investor sentiment on the
global economy and demand for raw materials.
European and Asian stock markets were up strongly on
Wednesday on hopes the Bank of Japan and other central banks
would join with the U.S. Fed and cut rates. []
Wall Street had its second-best day ever on Tuesday, as rate
cut hopes boosted major U.S. share indexes by more than 10
percent. []
"Energy is still very much in the orbit of the U.S. equity
market and has yet to decouple from it," said Edward Meir,
analyst at broker MF Global.
"If equities continue to gain ground, we would not be
surprised to see crude push higher in what could be an eventual
test of the $70 level," he said.
(Additional reporting by Maryelle Demongeot in Singapore;
editing by Anthony Barker)
