UPDATE 10-Oil rises as CIT deal fuels recovery optimism

                                
 * CIT rescue package helps lift global markets
                                
 * Leading economic index shows recession may be near end
                                
 * Algeria says OPEC may need to cut output in Sept
 (Updates prices, adds U.S. inventory poll)
                                
 By Matthew Robinson
                                
 NEW YORK, July 20 (Reuters) - Oil rose on Monday as optimism about a
potential global economic recovery lifted markets and expectations of a
turnaround in fuel demand.
                                
 World markets extended gains from last week on strong corporate
earnings and news of a rescue package for troubled U.S. lender CIT <CIT.N>
[ID:nSP484248].
                                
 U.S. crude <CLc1> traded up 45 cents to $64.01 a barrel by 2:29 p.m EDT
(1829 GMT), after rising more than 6 percent last week. Brent crude <LCOc1>
rose $1.05 to $66.43 a barrel.
                                
 Further support came after an index gauging the U.S. economy's
prospects increased for a third straight month in June, suggesting the
recession was drawing to a close. [ID:nN20289616]
                                
 The index of leading economic indicators, which is supposed to forecast
economic trends six to nine months out, rose 0.7 percent in June following
a revised 1.3 percent gain in May, the New York-based Conference Board
said.
                                
 "I think it's mostly continued follow-through after last week's rally.
Economic optimism fueling stronger equities and the weaker dollar are
supporting commodity markets," said Tom Bentz, analyst at BNP Paribas
Commodity Futures Inc.
                                
 A survey of economists showed the recession's grip on top oil consumer
the United States appeared to be easing but had not yet ended.
[ID:nN17480378]
                                
 The dollar hit a six-week low, also supporting commodities denominated
in the greenback, as investors waded back into riskier assets and
higher-yielding currencies. [USD/]
                                
 Algeria's oil minister said OPEC will need to cut output again when it
meets again in September if there is not enough demand for its crude.
[ID:nLK43940]
                                
 "I think OPEC's objective is to satisfy demand in the world market and
to meet any real demand," Chakib Khelil told reporters in Milan.
                                
 "It will cut only if demand is destroyed or it disappears in the
market. If we see demand does not exist in the market in September, we will
have to cut."
                                
 The producer group agreed to a series of cuts last year to lop 4.2
million barrels per day (bpd) of output from global markets as part of a
bid to lift flagging oil prices.
                                
 The global recessing has battered fuel demand, knocking crude from
record highs near $150 a barrel in July 2008 to below $33 a barrel in
December. Hopes an end to the recession will spark consumption have pushed
crude higher this year.
                                
 Data from the U.S. Department of Transportation showed Americans drove
0.1 percent more miles in May compared with year-ago levels, the second
straight monthly increase [ID:nN2074300].
                                
 A Reuters poll of analysts released ahead of weekly U.S. inventory data
forecast crude stockpiles fell by 1.8 million barrels in the week to July
17, which would mark the seventh straight week of declines. Distillate and
gasoline stocks were forecast up. [EIA/S]
                                
 The U.S. Department of Energy will release its data on Wednesday, with
data from the American Petroleum Institute due out late Tuesday.
 (Editing by John Picinich)
 (Additional reporting by Robert Gibbons in New York, Alex Lawler in
London, Fayen Wong in Perth and Svetlana Kovalyova in Milan)