* Oil down more than $3 after paring losses on Fed move
* U.S. Q3 GDP contracted 0.5 pct, in line with forecasts
* Focus on Saturday OPEC meeting; cut may not come this week
(Recasts, updates prices)
By Jane Merriman
LONDON, Nov 25 (Reuters) - Oil fell more than $3 to below
$52 a barrel on Tuesday, unravelling a near 10 percent rally the
previous session as optimism over the latest government bank
bail-out dispersed.
Prices had risen 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 $3.15 lower
at $51.35 a barrel by 1551 GMT, up from a three and half year
low of $48.25 on Friday.
London Brent crude <LCOc1> was $2.36 lower at $51.57. Brent
is slightly higher than U.S. crude for the first time since
August.
"Trading volume looks quite light this week, ahead of the
U.S. Thanksgiving holiday on Thursday and the OPEC meeting on
Saturday," said Tim Evans, analyst at Citi Futures Perspective.
"That might be contributing something to the ease with which the
oil market has shed Monday's gains."
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, but the fall was no worse than expected.
"There were fears that it would be much worse," said Ron
Simpson, director, FX Research, Action Economics.
Oil only briefly pared the day's earlier losses on news of
the U.S. Fed's action to spend $600 billion buying mortgage debt
and a further $200 billion on consumer debt, moves that 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.
BRIEF RALLY
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.
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.
Analysts polled by Reuters predicted U.S. stocks of
distillates -- which include heating oil -- would have fallen by
1 million barrels last week. []
(Additional reporting by Barbara Lewis in London and Maryelle
Demongeot in Singapore; editing by Anthony Barker)
