* Oil pares losses after US Fed boosts mortgage market
* U.S. Q3 GDP contracted 0.5 pct, in line with forecasts
* Focus on Saturday OPEC meeting; cut may not come this week
(Adds U.S. Federal Reserve action, GDP data, updates prices)
By Jane Merriman
LONDON, Nov 25 (Reuters) - Oil pared its initial losses on
Tuesday to climb back above $53 a barrel, after the U.S. Federal
Reserve acted to support mortgage markets and U.S. GDP turned
out to be no worse than forecast.
Prices had staged a near-10 percent rally in the previous
session fuelled by optimism over Washington's $20 billion rescue
of struggling Citigroup <C.N>, the second-largest U.S. bank.
U.S. light crude for January delivery <CLc1> was 98 cents
lower at $53.52 a barrel by 1420 GMT, up from a three and half
year low of $48.25 on Friday.
London Brent crude <LCOc1> was 65 cents lower at $53.28.
"The markets were relieved that the U.S. GDP data came in
line with expectations and we're seeing stocks move higher and
euro/dollar higher," said Ron Simpson, director, FX Research,
Action Economics.
"There were fears that it would be much worse," he said.
The U.S. economy shrank 0.5 percent in the third quarter,
the sharpest fall in gross domestic product since the third
quarter of 2001.
The U.S. Fed's action to spend $600 billion buying mortgage
debt and a further $200 billion on consumer debt could help
unfreeze the credit markets. [] []
The economic slowdown in the top energy consumer the United
States and other industrial countries has contributed to oil's
fall of almost $100 from a peak of more than $147 in July.
Oil had advanced almost 10 percent on Monday, following a
small rise on Friday, which marked the first time since
mid-September it had risen for two days in a row.
The U.S. government's bailout of Citigroup had spurred
strong gains across financial markets.
"The effect of these financial packages tends to fade quite
quickly," said Michael Lewis of Deutsche Bank of the brief
impact of government intervention.
He predicted oil prices had further to fall, possibly to as
low as $30-$35 a barrel by the end of next year, and said any
OPEC cuts would take time to take effect.
"Normally, it takes them about a year of cutting production,
then the price starts to stabilise," he said.
CAIRO MEETING
The Organization of the Petroleum Exporting Countries will
meet informally in Cairo on Saturday only a month after it
agreed to cut oil production by 1.5 million barrels per day
(bpd) from Nov. 1.
OPEC President Chakib Khelil said on Monday the current
market weakness implied the need for a further reduction of more
than one million bpd.
But, as the impact of existing curbs filters through only
gradually, he said the supply demand balance would probably not
be clear until the group's official policy-setting meeting on
Dec. 17.
In the nearer term, the market could draw some support from
colder weather, which would increase heating oil demand.
Ahead of the next set of U.S. government inventory data,
analysts polled by Reuters predicted stocks of distillates --
which include heating oil -- would have fallen by 1 million
barrels. []
They expected the data for release on Wednesday would also
show crude stocks had risen by 400,000 barrels and gasoline
stocks by 700,000 barrels in the week to Nov. 21.
(Additional reporting by Barbara Lewis in London and Maryelle
Demongeot in Singapore; editing by James Jukwey)
