* HSBC's Oct China PMI hits 18-month high of 55.4
* U.S. equities expected to open higher, dollar index steady
* OPEC output edges lower - Reuters survey
(Updates prices)
By Barbara Lewis
LONDON, Nov 2 (Reuters) - Oil rose above $77 a barrel on
Monday, recovering from the previous session's steep drop, after
manufacturing data from China revived expectations economic
recovery would generate extra fuel demand.
Prices also drew some support from a Reuters survey showing
OPEC output had declined slightly, but at the same time
production from non-OPEC Russia reached a new post-Soviet
record. [] []
Traders and analysts said the mood remained cautious as
equities markets sank to one-month lows and braced for the
possible withdrawal of stimulative monetary policy as major
central banks meet this week.
U.S. crude for December delivery <CLc1> rose 19 cents to
$77.19 a barrel by 14195 GMT, reversing some of Friday's loss of
$2.87, but down from a session high of $78.25. Brent crude
<LCOc1> rose 32 cents to $75.52.
Monday's rally was initially stoked by news HSBC's China
Purchasing Managers' Index (PMI) had risen for the seventh
straight month in October, to an 18-month high of 55.4, pointing
to sustained strength in the country's vast manufacturing
sector. []
"Chinese demand is a straw in the wind," said Christopher
Bellew of brokerage Bache Financial.
"But patchy, fragile are the sort of words being used to
describe recovery. There is no real sign of demand increasing."
FAILURE TO HOLD ABOVE $80
After hitting a high for this year of $82 a barrel in late
October, U.S. crude failed to sustain gains above $80.
Its 3.6 percent fall on Friday followed data from the United
States, the world's biggest energy consumer, showing weaker
consumer sentiment in October and consumer spending cuts in
September.
The figures also dragged down equities markets. Still, U.S.
stock index futures pointed to a higher open on Monday ahead of
data expected to show the U.S. manufacturing sector grew in
October.
U.S. manufacturing data from the Institute of Supply
Management is due at 10 a.m. EST (1500 GMT) and is expected to
show growth in the sector for the third straight month.
The dollar was steady against a basket of currencies on
Monday <.DXY>. A weak dollar lends support to oil and other
dollar-denominated commodities, which become cheaper for
non-dollar investors when the U.S. currency falls.
During several months of rising equity markets, oil mostly
moved higher in sympathy, while being negatively correlated to a
declining U.S. dollar.
The dollar was steady against a basket of currencies on
Monday <.DXY>. A weaker dollar supports oil and other
dollar-denominated commodities, which become cheaper for
non-dollar investors when the U.S. currency falls.
Some in the Organization of the Petroleum Exporting
Countries have expressed concern dollar weakness this year has
driven speculative buying in oil.
After oil climbed above $80, they voiced the possibility the
group could raise output when it next meets in December,
provided there were evidence of economic growth and the price
continued to rise.
The latest Reuters survey found OPEC oil supply had fallen
slightly in October, the first drop since April, following
pipeline sabotage in Iraq and lower output from Nigeria and
leading exporter Saudi Arabia. []
At the same time, production from the biggest non-OPEC
producer Russia climbed to 10.04 million barrels per day (bpd)
in October from 10.01 million bpd in September. []
(Additional reporting by Alex Lawler and Fayen Wong; Editing
by James Jukwey)
