* Oil up more than $4 after near-$5 fall on China fuel hike
* Analysts say China price hike may lead to increased demand
* OPEC President says "irrational" to call for more oil
(Updates prices, adds detail)
By Santosh Menon
LONDON, June 20 (Reuters) - Oil rebounded more than $4 a
barrel on Friday in response to views now gaining ground that a
fuel price increase by China may actually boost rather than
curtail demand for fuel.
Oil had plunged nearly $5 in the previous session after
China raised fuel prices by up to 18 percent, its first hike in
eight months as the government bowed to a nearly $40 increase in
crude prices since the last hike in November.
U.S. July crude <CLc1>, which expires on Friday, rose $3.50
to $135.43 a barrel by 1520 GMT, off highs of $136.80. London
Brent <LCOc1> was up $3.43 at $135.43.
Initial forecasts suggested the move by China, the world's
second-largest oil consumer, would hurt demand, but some
analysts now say consumption will rise as the price increase
will encourage healthier supply at the pumps.
Chinese fuel pumps have faced long queues and rationing as
refiners cut back on production to limit hefty losses made by
selling discounted fuel. []
"We do not think that a country where consumers are used to
waiting 3 hours for automotive fuel in many cases, will see
significant negative demand elasticity from a simple
20 percent price increase," said Citi analyst James Neale.
Societe Generale analyst Mike Wittner added: "We think, if
anything, the Chinese price increase would tend to increase
consumption and not decrease it."
Demand from China, India and the Middle East has been cited
as a factor behind oil's almost sevenfold surge from $20 six
years ago to a record high of nearly $140 a barrel.
Oil's rally on Friday was also supported by a weaker dollar
[] and concerns over tensions in the Middle East after
reports that Isreal had carried out a large military exercise
this month that appeared to be a rehearsal for a potential
bombing attack on Iran's nuclear facilities. []
HOTSPOTS
"Traders don't want to be short going into the weekend.
There are just too many hotspots around the world now... There
is more potential for bullish news than bearish news," said
Gerard Rigby of Fuel First Consulting in Sydney.
Another hotspot is Nigeria, where militants in speedboats
attacked Royal Dutch Shell's <RDSa.L> 220,000-barrel-per-day
Bonga offshore facility and cut oil output at the world's
eighth-largest oil producer by a tenth.
Shell said it was too soon to say how long output at the
deepwater installation would be shut down. OPEC member Nigeria
is already producing about 20 percent below potential due to
sabotage by militants in the Niger Delta oil hub.
Meanwhile, expectations are receding that an emergency
meeting between consumers and producers in Saudi Arabia on
Sunday to discuss ways to tame oil prices could lead to a
meaningful increase in supplies.
"The more information that comes out, it seems that there is
possibly less to this meeting than meets the eye," said Wittner,
adding that expectations of any supply boost had been scaled
down to 200,000 barrels per day now from 500,000 bpd a week ago.
OPEC President Chakib Khelil said demands by consumer
countries for OPEC to increase its offer of oil was "illogical
and irrational". []
Iran said it was unlikely that OPEC members would reach an
agreement on crude output change at the weekend meeting.
Venezuela does not plan to attend.
(Additional reporting by Chua Baizhen; Editing by James Jukwey)
