* Oil pares losses after U.S. Fed leads interest rate cuts
* Global economic weakness threatens fuel demand
(Updates throughout)
By Joe Brock
LONDON, Oct 8 (Reuters) - Oil on Wednesday recovered from a
10-month low, but stayed negative after the U.S. Federal Reserve
led a global round of emergency interest rate cuts to try to
shore up the world economy.
U.S. light crude for November <CLc1> delivery was down 79
cents at $89.27 a barrel by 1148 GMT.
London Brent crude <LCOc1> fell by 36 cents to $84.30.
"The oil market could take these rate cuts either way," said
Helen Henton, head of commodities at Standard Chartered Bank.
"They might decide that this is a sign that things are
really, really bad now and demand is going to suffer as a
result, or they could see it as the strong coordinated action
the market has been needing to strengthen the global economy. A
lot of investors are going to wait and see."
Earlier in the session U.S. crude had fallen by more than $4
to $86.05, its lowest level since Dec 6, 2007 after British
government action to prop up its banks failed to reassure
financial markets and oil traders predicted oil demand would
fall.
Financial markets rallied collectively after the U.S.-led
rates cuts.
The U.S. Federal Reserve said it was cutting its key rate by
50 basis points to 1.5 percent.
Other banks cutting interest rates also included China,
which reduced its key rate by 27 basis points.
Surging oil demand in China and elsewhere in Asia played a
large part in oil's sustained rally that culminated in a record
of $147.27 in July this year.
Many analysts had predicted Chinese fuel demand would remain
strong even if it plummeted in the United States, the world's
biggest energy consumer, but concern has mounted that the
Chinese economy will not escape global economic turmoil.
Later on Wednesday, attention will turn to oil inventory
data from the U.S. government's Energy Information Agency (EIA),
expected to be released at 1435 GMT. An increase in inventories
could put further pressure on crude prices.
Crude stocks probably rose for the second week in a row last
week as imports continued to rebound after storm disruptions, a
Reuters poll of 11 analysts showed. []
Signs members of the Organization of the Petroleum Exporting
Countries (OPEC) have become uneasy about oil's sharp price drop
also failed to hold up prices, following a $2 a barrel rise on
Tuesday.
Libya joined fellow OPEC members Iran and Iraq in expressing
concern this week about the impact of the crisis on oil demand.
"If this volatility continues, OPEC will have to do
something," Shokri Ghanem, chairman of Libya's National Oil
Corp, told Reuters on Tuesday.
OPEC's next scheduled meeting is in Algeria in December.
(Additional reporting by David Sheppard; Editing by Barbara
Lewis and Anthony Barker)
