* Oil recovers after previous session's fall
* Supply in focus; stocks rise, Russia output at record
* ECB keeps main interest rates as expected at 1 pct
(Updates prices, adds ECB rate decision)
By Chris Baldwin
LONDON, Dec 3 (Reuters) - U.S. crude rose on Thursday as
fund activity helped the market to recover from a sell-off the
previous session, but oversupply curbed gains.
NYMEX crude for January delivery <CLc1> rose 69 cents to
$77.29 a barrel by 1333 GMT, after settling down $1.77 at $76.60
on Wednesday.
Brent crude <LCOc1> rose 92 cents to $78.80 per barrel after
touching a session high of $78.91.
Wednesday's falls, which stemmed a two-day rise, followed
U.S. government data showing crude stocks rose 2.1 million
barrels last week, topping the forecast for a 400,000 barrel
rise in a Reuters poll. []
The mass of available crude had a particularly marked impact
on contracts for delivery in the near term and fund flows were
moving from the front-month January contract into February
crude, analysts said.
A European Central Bank announcement that it would maintain
its main interest rates at 1 percent, widely expected and
generally priced in, held no sway over oil prices, but set the
stage for an eventual phase-out of its financial crisis support.
[]
The focus will now be on what ECP President Jean-Claude
Trichet says at his 1330 GMT news conference.
"The end result over the next six months is you have low
interest rates with unleveraged cash in bank accounts seeking
somewhere to go in search of yield, and this favours risk
appetite and supports equities," said senior BNP Paribas
commodities analyst Harry Tchilinguirian.
This can also support oil, but its weak fundamentals have
modified the potentially bullish impact.
"Oil will keep doing what it has been doing in relation to
equities since March. It's not that oil prices are disconnected
from fundamentals, it's that front month prices are reacting to
equity markets," Tchilinguirian said.
European shares rose for a third consecutive session on
Thursday. The FTSEurofirst 300 <> was up 0.4 percent at
1,020.20 points and 58 percent from the life-time low in March
after slumping 45 percent in 2008 because of the global economic
downturn. []
OPEC OUTPUT
Oil hit a high of $82 a barrel in October, but failed to
hold above that level as the combination of excess supply,
sluggish demand and nervousness about a fragile world economy
have knocked the market lower.
The Organization of the Petroleum Exporting Countries meets
to reconsider its output policy on Dec. 22 in Angola.
Ahead of that, ministers of the core Arab members of OPEC
meet at the weekend in Cairo, where they are expected to discuss
supply and demand but without taking formal decisions on the
group's production.
Kuwait's oil minister in comments to reporters on Thursday
said he was concerned about the high levels of inventory,
although he did not expect the group to change output targets at
its December meeting. []
Adding to OPEC's challenges, the biggest non-OPEC oil
exporter Russia set a fourth consecutive monthly output record
in November.
It is currently the world's largest producer, although Saudi
Arabia is the world's biggest exporter and has shut in spare
capacity. []
For a graphic showing oil prices and spreads, click:
http://graphics.thomsonreuters.com/129/CMD_OILSPRD1209.gif
(Additional reporting by Nick Trevethan in Singapore, editing
by Barbara Lewis and Anthony Barker)
((christopher.baldwin@reuters.com; +442075427526))
