Oil steadies near $63 after surge

LONDON, Sep 28 (Reuters) Oil steadied near a barrel on Thursday, holding onto the previous day's gains supported by investment fund buying and speculation that OPEC could trim output to bolster prices.

Buying by funds helped crude oil rally almost LONDON, Sep 28 (Reuters) Oil steadied near $63 a barrel on Thursday, holding onto the previous day's gains supported by investment fund buying and speculation that OPEC could trim output to bolster prices.

Buying by funds helped crude oil rally almost $2 in New York on Wednesday, even after the latest report on U.S. fuel inventories showed a larger-than-expected increase in fuel supplies.

''The market is astonishingly strong,'' said Christopher Bellew, a broker at Bache Financial. ''Really it seems to be buying by funds, either short-covering or adding to their length because they'd got rid of a lot of their length.'' U.S. crude rose 11 cents to $63.07 a barrel at 1150 GMT, having earlier climbed to $63.35, the highest since Sept. 19. London Brent was up 39 cents at $62.60 a barrel.

Oil in New York has fallen from a July peak of $78.40 because of rising U.S. fuel stocks, easing economic growth and diminishing tensions over Iran's nuclear stand-off, the steepest drop since the 1991 Gulf War.

Swelling fuel inventories in the United States and talks between the European Union and Iran to resolve the dispute over Tehran's nuclear work suggest the rally may be short-lived, analysts said.

The European Union and Iran resumed talks over Tehran's nuclear ambitions on Thursday but failed to reached a deal.

Washington has warned time is running out for a deal to avert economic sanctions.

Iran is the world's fourth largest oil exporter, and an agreement to end the standoff over its nuclear work could lead to more weakness for oil prices.

''We don't think the markets have completely discounted the possibility of a breakthrough here, and so the upside could be treacherous until the status of these negotiations (is) clarified,'' Man Financial said.

OPEC Speculation OPEC might trim output helped bolster prices, although officials say OPEC has no plan yet to meet before its next scheduled conference in December.

A drop below the $60 mark on Monday drew a mixed response from members of the Organization of the Petroleum Exporting Countries, which pumps more than a third of the world's oil.

Edmund Daukoru, OPEC's president, told Reuters on Tuesday ''something needs to be done to steady the price.'' But Kuwaiti Oil Minister Sheikh Ali al-Jarrah al-Sabah said on Wednesday that with U.S. crude above $61, most OPEC ministers were content with prices and not inclined now to cut output.

Last week, Ali al-Naimi, oil minister for Saudi Arabia -- the world's top oil exporter -- also described a U.S. crude price of around $62 as reasonable.

REUTERS PKS GC1748 in New York on Wednesday, even after the latest report on U.S. fuel inventories showed a larger-than-expected increase in fuel supplies.

''The market is astonishingly strong,'' said Christopher Bellew, a broker at Bache Financial. ''Really it seems to be buying by funds, either short-covering or adding to their length because they'd got rid of a lot of their length.'' U.S. crude rose 11 cents to .07 a barrel at 1150 GMT, having earlier climbed to .35, the highest since Sept. 19. London Brent was up 39 cents at .60 a barrel.

Oil in New York has fallen from a July peak of .40 because of rising U.S. fuel stocks, easing economic growth and diminishing tensions over Iran's nuclear stand-off, the steepest drop since the 1991 Gulf War.

Swelling fuel inventories in the United States and talks between the European Union and Iran to resolve the dispute over Tehran's nuclear work suggest the rally may be short-lived, analysts said.

The European Union and Iran resumed talks over Tehran's nuclear ambitions on Thursday but failed to reached a deal.

Washington has warned time is running out for a deal to avert economic sanctions.

Iran is the world's fourth largest oil exporter, and an agreement to end the standoff over its nuclear work could lead to more weakness for oil prices.

''We don't think the markets have completely discounted the possibility of a breakthrough here, and so the upside could be treacherous until the status of these negotiations (is) clarified,'' Man Financial said.

OPEC Speculation OPEC might trim output helped bolster prices, although officials say OPEC has no plan yet to meet before its next scheduled conference in December.

A drop below the mark on Monday drew a mixed response from members of the Organization of the Petroleum Exporting Countries, which pumps more than a third of the world's oil.

Edmund Daukoru, OPEC's president, told Reuters on Tuesday ''something needs to be done to steady the price.'' But Kuwaiti Oil Minister Sheikh Ali al-Jarrah al-Sabah said on Wednesday that with U.S. crude above , most OPEC ministers were content with prices and not inclined now to cut output.

Last week, Ali al-Naimi, oil minister for Saudi Arabia -- the world's top oil exporter -- also described a U.S. crude price of around as reasonable.

REUTERS PKS GC1748