Oil recovers further towards $62 after 6-week dive

SINGAPORE, Sep 22 (Reuters) Oil prices rose for a second day on Friday after a brief mid-week dip below , as investors anticipated the market's six-week slump driven by rising U.S.

inventories and easing Iran tensions may be coming to an end.

The more than 20 percent tumble since early August to hit six-month lows this week has raised expectations that OPEC, which decided two weeks ago to maintain production for the time being, will curb output to limit any further losses.

U.S. light crude for November delivery rose 36 cents to .95 by 0339 GMT -- after hitting an intraday hgh of .02 -- adding to a 85-cent gain on Thursday. London Brent crude was up 28 cents at .62.

Oil has lost about over the past six weeks in a steady slide interrupted by a handful of false rallies, but the exodus of investment funds that has deepened losses was likely to end soon given the approach of winter demand and OPEC cuts.

''You have had a very big sell-off. Continued downside momentum would require a continued flow of bad news, which I don't think we are going to get,'' said Michael Coleman, a partner with Singapore-based hedge fund Aisling Analytics.

''We think prices have got potential to stabilise and consolidate. Stocks are high but we are also going into winter.

Geopolitical tensions are easing, but they are as easy as they are going to be,'' he added.

In a comment seen signalling a possible shift from the world's biggest exporter, Saudi oil minister Ali al-Naimi said on Tuesday that prices were ''reasonable'', a break from the past year when he has consistently said that prices are too high.

Rising fuel inventories in the United States have fed an increasingly bearish sentiment ahead of winter.

Distillates stocks, which include heating oil, stand at their highest level since January 1999, while crude inventories are also in their upper range for this time of the year.

Domestic gas inventories also stand at record-high levels for this time of year, standing at 356 billion cubic feet, or 13 percent above last year, after having risen by 93 bcf in the past week, the U.S. Energy Information Administration said on Thursday.

A surprise drop in regional factory activity reported on Thursday suggested that the U.S. economy may be losing momentum faster than most economists anticipated.

The Philadelphia Federal Reserve Bank said its business activity index tumbled to minus 0.4 in September from 18.5 in August, the first time the index had fallen below zero since April 2003, and indicating a decline in manufacturing.

Further easing supply risks, Iranian President Mahmoud Ahmadinejad said on Thursday his country was prepared to negotiate a suspension of its most sensitive nuclear work if it received fair guarantees in talks with major powers.

This was the most explicit public statement by an Iranian leader that Tehran is considering complying with the key condition for talks on broad co-operation with the West.

''We have said that under fair conditions and just conditions we will negotiate about it,'' the president said.

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