Oil rebounds toward $ 95 as stock markets steady

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SINGAPORE, Nov 6 (Reuters) Oil bounced back toward a barrel on Tuesday, gaining almost 1 percent as Asian stock markets steadied and traders bet that falling U.S. inventories and the approaching winter could help restart oil's rally.

U.S. light crude for December delivery rose 81 cents to .79 a barrel, climbing back toward the record high .24 a barrel touched last week after tumbling on Monday on the prospect of more fallout from the U.S. subprime crisis.

London Brent crude rose 81 cents to .30 a barrel.

Asian stock markets eked out gains early on Tuesday after tumbling world markets dragged oil SINGAPORE, Nov 6 (Reuters) Oil bounced back toward $95 a barrel on Tuesday, gaining almost 1 percent as Asian stock markets steadied and traders bet that falling U.S. inventories and the approaching winter could help restart oil's rally.

U.S. light crude for December delivery rose 81 cents to $94.79 a barrel, climbing back toward the record high $96.24 a barrel touched last week after tumbling on Monday on the prospect of more fallout from the U.S. subprime crisis.

London Brent crude rose 81 cents to $91.30 a barrel.

Asian stock markets eked out gains early on Tuesday after tumbling world markets dragged oil $2 lower just a day earlier, with traders fearing the subprime crisis could temper economic growth and oil demand in the world's top consumer.

Citigroup, the largest U.S. bank, said it was unable to assure investors a potential $11 billion write-down for subprime mortgages will not increase.

Tokyo's Nikkei stock market average climbed 0.5 percent on Tuesday, recovering some ground after a 1.5 percent slide, while U.S. markets had also clawed back some losses late on Monday.

''Today the stock market is steady, which is supporting NYMEX,'' said Ken Hasegawa, commodity derivatives sales manager of Fimat Japan Inc.

Oil's surge from below $70 in mid-August has been aided by the weak dollar and speculative inflows into oil and other commodities, and extended lately by a renewed focus on signs of thinning oil supplies ahead of peak winter demand.

U.S. crude oil stocks are expected to have fallen by another 1.6 million barrels last week due to disruptions to short-haul Mexican shipments, according to a preliminary Reuters poll. Stocks normally rise heading into the winter peak season.

Distillate inventories were seen falling by 700,000 barrels and gasoline stocks by 100,000 barrels.

Inventories in Japan, the world's third-largest consumer, are also running below comfort levels.

''The temperatures in December in the north are expected to be below normal, so that is also a concern for us with the low inventories,'' said Hasegawa.

U.S. Energy Secretary Sam Bodman said current prices were a ''terrible problem'' for consumers, adding he hoped oil producer group OPEC would ramp up output to ease prices, although most cartel officials have rejected that call.

Venezuelan Oil Minister Rafael Ramirez on Monday echoed other officials, saying high prices were due to speculation and geopolitical tensions, not a shortfall in supplies.

Markets have been eyeing tensions in the Middle East including a recent flare-up between Turkey and Kurdish rebels in northern Iraq, although signs of a softening tone added to the market's sell-off a day ago, analysts said.

Iraq said on Saturday it was ready to arrest Kurdish guerrilla leaders responsible for cross-border raids to avert a major incursion, while U.S. President Bush told Turkey's leader that he was committed to countering the militants.

REUTERS SLD SSC1131 lower just a day earlier, with traders fearing the subprime crisis could temper economic growth and oil demand in the world's top consumer.

Citigroup, the largest U.S. bank, said it was unable to assure investors a potential billion write-down for subprime mortgages will not increase.

Tokyo's Nikkei stock market average climbed 0.5 percent on Tuesday, recovering some ground after a 1.5 percent slide, while U.S. markets had also clawed back some losses late on Monday.

''Today the stock market is steady, which is supporting NYMEX,'' said Ken Hasegawa, commodity derivatives sales manager of Fimat Japan Inc.

Oil's surge from below in mid-August has been aided by the weak dollar and speculative inflows into oil and other commodities, and extended lately by a renewed focus on signs of thinning oil supplies ahead of peak winter demand.

U.S. crude oil stocks are expected to have fallen by another 1.6 million barrels last week due to disruptions to short-haul Mexican shipments, according to a preliminary Reuters poll. Stocks normally rise heading into the winter peak season.

Distillate inventories were seen falling by 700,000 barrels and gasoline stocks by 100,000 barrels.

Inventories in Japan, the world's third-largest consumer, are also running below comfort levels.

''The temperatures in December in the north are expected to be below normal, so that is also a concern for us with the low inventories,'' said Hasegawa.

U.S. Energy Secretary Sam Bodman said current prices were a ''terrible problem'' for consumers, adding he hoped oil producer group OPEC would ramp up output to ease prices, although most cartel officials have rejected that call.

Venezuelan Oil Minister Rafael Ramirez on Monday echoed other officials, saying high prices were due to speculation and geopolitical tensions, not a shortfall in supplies.

Markets have been eyeing tensions in the Middle East including a recent flare-up between Turkey and Kurdish rebels in northern Iraq, although signs of a softening tone added to the market's sell-off a day ago, analysts said.

Iraq said on Saturday it was ready to arrest Kurdish guerrilla leaders responsible for cross-border raids to avert a major incursion, while U.S. President Bush told Turkey's leader that he was committed to countering the militants.

REUTERS SLD SSC1131

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