* U.S. data shows big increase in crude inventories
* China cuts interest rates by 1.08 percent
* OPEC meets at the weekend, unlikely to make any decisions
(Updates throughout)
By David Sheppard and Ikuko Kao
LONDON, Nov 26 (Reuters) - Oil rose above $53 on Wednesday,
reversing a drop shortly after U.S. data showed a sharp increase
in crude oil inventories.
U.S. crude <CLc1> was trading $2.29 higher at $53.06 a
barrel by 1622 GMT, after falling toward $51.
London Brent crude <LCOc1> rose 93 cents to $52.28.
U.S. government data showed crude oil inventories rose 7.3
million barrels last week, compared with analysts' forecast of
an 800,000 barrel increase. []
However, the increase in crude oil stocks was seen
reflecting stockbuilding to take advantage of the market
structure contango, where longer-dated crude oil contracts are
priced higher than the front month contract.
That is also because the data showed relatively healthy
product demand, analysts said.
"The crude build was huge, but we think this reflects the
very steep contango forward crude curve. There's a $25 to $30
premium in price in out months," Mark Kellstrom, analyst with
Strategic Energy Research and Capital, said.
"On first blush, demand numbers look okay...I think gasoline
demand was 9 million barrels a day, which I think is fine."
Oil has been trading up most of the time on Wednesday as
China cut interest rates earlier in the day. []
The cut boosted hopes that a prolonged slowdown in the
world's fastest growing oil consumer can be avoided and it
provided some support to oil prices.
Oil has plummeted by almost $100 a barrel since hitting a
peak above $147 a barrel in July and prices have failed to post
three consecutive days of gains since September.
That prompted many analysts to revise down their price
assumptions. []
U.S. bank Merrill Lynch cut its oil price forecast for 2009
to $50 a barrel from $90 a barrel on Wednesday. []
The slowing global economy has hit oil demand hard, with
many analysts predicting demand growth next year could be flat
or even fall for the first time since the early 1980s.
The oil market is also watching an informal meeting of the
Organization of the Petroleum Exporting Countries (OPEC) in
Cairo on Saturday.
OPEC ministers are likely to debate a deep cut in oil supply
amid the downward price spiral but hold off taking a decision
until their policy-setting meeting in mid-December in Algeria.
"The bullish and bearish influences are pretty evenly
balanced at the moment with speculation of a further OPEC
production cut largely offset by the ongoing concerns over
falling demand," Bank of Ireland analyst Paul Harris said.
(Additional reporting by Maryelle Demongeot in Singapore;
Editing by James Jukwey and Sue Thomas)
