Oil falls below $60 despite OPEC output cut plan

SINGAPORE, Oct 6 (Reuters) Oil fell below on Friday, reversing course from the previous day as traders weighed OPEC's plans to cut production by 1 million barrels per day (bpd) against overflowing stockpiles.

U.S. crude dropped 33 cents to .70 a barrel by 0404 GMT, after 62-cent gains on Thursday, when prices rallied to a peak of .97 after the OPEC comments. London Brent shed 27 cents to .73.

Officials from the Organization of the Petroleum Exporting Countries (OPEC) said on Thursday the group would cut output as soon as possible -- its first output cut in more than two years.

An OPEC delegate said Saudi Arabia, the world's top exporter, would lower production by 300,000 bpd as part of the plan, while OPEC President Edmund Daukoru said six producers, including Saudi Arabia, had already reduced output voluntarily.

The cutback plans by OPEC, which pumps more than a third of the world's oil, expands on marginal supply cutbacks announced last week by Nigeria and Venezuela.

''There were some knee-jerk reactions to news of OPEC cutting supplies but the gain was not sustained mainly because of high U.S.

stock levels,'' said Ken Hasegawa, a manager at Himiwari CX, Japan's largest commodities futures broker.

''Supply is really overflowing now, so this is just not a time for prices to go up higher,'' Hasegawa added.

Nine OPEC countries will take part in the supply curbs and will cut their ''fair share'' from overall OPEC production, a senior delegate said. OPEC pumped 29.47 million bpd in September, a Reuters survey showed.

Daukoru said on Thursday that some members wanted an emergency meeting before a gathering already scheduled for December, and talks were continuing on how to stem what he called a free-fall in prices.

STOCK CUSHION Oil prices have been little boosted as investors turned their attention to brimming U.S. fuel inventories and as some traders remained sceptical in the absence of a formal OPEC announcement.

U.S. crude stocks rose by 3.3 million barrels last week to 328.1 million barrels, countering expectations for a drop and leaving them nearly 7 percent higher than a year ago, according to a government report this week.

Distillate supplies, which include heating oil, rose 200,000 barrels to the highest level since 1999.

Despite the high stock cushion, OPEC's plan disappointed the world's top oil consumer, which expressed concern given peak winter demand is around the corner.

U.S. Energy Secretary Sam Bodman said he did not want OPEC to cut daily output by 1 million barrels, and White House economic adviser Al Hubbard said President George W. Bush was not happy with oil prices near a barrel.

OPEC's official output limit has stood at 28 million bpd for more than a year. Analysts say OPEC's plan to slash output by 1 million bpd would at best lend support to prices, but was unlikely to drive prices much higher.

''Even if OPEC cuts output now, prices would very much stay at the same level,'' Hasegawa said.

Violence in Nigeria remains a potentially bullish factor, given the risk of further supply disruptions. Nigerian militants accused troops of razing a village in the oil-producing Niger Delta on Thursday and threatened reprisals, although a military spokesman denied an attack had occurred.

The latest incidents this week did not affect production, though a fifth of Nigeria's production capacity remains shut.

REUTERS CS KP1132