* U.S. Fed interest rate cut half a percentage point
* Dollar slides, world stock markets gain
* U.S. crude inventories down less than expected
(Updates prices, adds comment)
By Chris Baldwin
NEW YORK, Oct 29 (Reuters) - Oil trimmed early gains of
nearly 9 percent on Wednesday as an expected cut in U.S.
interest rates sent U.S. stock markets lower and the dollar was
on pace for its biggest one-day decline in 13 years.
The U.S. Federal Reserve cut a key interest rate by a hefty
half-percent to prevent a widening credit crisis, taking its
target for overnight bank lending to 1 percent, the lowest
since 2004.
Stocks gyrated in highly volatile trade following the rate
cut while the dollar pared losses against the euro but was down
sharply against a basket of currencies.[]
U.S. crude <CLc1> rose $5.07 to $67.80 a barrel by 2:53
p.m. EDT (1853 GMT), after hitting a session high of $68.91.
London Brent crude <LCOc1> surged $5.36 a barrel to
$65.65.
"This latest Fed rate cut hopefully could serve to revive
the economy and for the long-term improve demand for crude oil
and petroleum products," said Andy Lebow, a broker at MF
Global.
"At the moment, I don't see the Fed decision affecting
session prices on crude futures. NYMEX crude is holding on to
large gains made earlier. It doesn't look like there is any
impulse buying or selling at the moment," he said.
The global financial crisis has hit oil demand and sent
crude prices tumbling from record highs over $147 a barrel
struck in July.
Earlier this year, investors poured cash into oil and other
commodities as a hedge against inflation and the slumping
greenback.
U.S. INVENTORIES
U.S. crude inventories last week rose 500,000 barrels, less
than the 1.4-million-barrel gain expected by analysts,
according to data released by the U.S. Energy Information
Administration. []
Distillate stocks rose 2.3 million barrels -- above the
800,000-barrel increase forecast by analysts, while gasoline
stocks fell by 1.5 million barrels compared with analysts
expectations of a 1.2-million-barrel build.
Gasoline demand continued to fall, down 3.4 percent over
the past four weeks versus the year-ago period, while total
product demand was down 7.8 percent for the same period.
Some OPEC members have said the producer group could cut
oil production again to help support prices, after agreeing to
a 1.5-million-barrel-per-day (bpd) reduction last week.
"If there is a surplus in the market, if nobody needs the
production, then a decision might be taken," Kuwait Oil
Minister Mohammad al-Olaim told reporters. []
Venezuela would back an additional OPEC production cut,
possibly of 1 million barrels per day, if it were necessary to
stabilize crude oil prices, President Hugo Chavez said on
Tuesday. []
(Additional reporting by Jane Merriman in London and Maryelle
Demongeot in Singapore; Editing by Christian Wiessner)
