* Oil rebounds with stocks, dollar rises
* Investors wary of possible Chinese rate rise, OPEC meeting
* U.S. jobless claims fall 17,000 last week
(Updates with new quotes, U.S. jobless data, prices)
By Christopher Johnson and Una Galani
LONDON, Dec 9 (Reuters) - Oil prices edged up on Thursday
after two days of declines, supported by ongoing cold weather in
Europe and renewed optimism about global economic growth, but
later pared some of its gains as the dollar turned positive.
Benchmark U.S. light crude oil futures for January <CLc1>
traded 54 cents up at $88.82 at 1400 GMT after rising more than
$1 earlier on Thursday. ICE Brent crude <LCOc1> added 58 cents
to $91.35.
A positive reading of the weekly U.S. unemployment benefit
claims also lent support, as jobless claims fell 17,000 last
week and the four-week moving average hovered at two-year lows.
A more benign labour market environment could support
consumption in the United States, the world's biggest oil user.
In Europe, shares hit a 26-month high on Thursday and Asian
markets closed higher. [] []
Christophe Barret, an analyst at Credit Agricole, attributed
the rise in the oil price to the ongoing cold weather in Europe
and forecast that it would continue to support prices in the
coming days despite the rebound in the dollar.
"I think that what is supporting oil prices right now is the
cold snap that we are having in Europe. It's still very cold.
And because of the cold we are using a lot of fuel oil, heating
oil and kerosene," he said.
Oil thinned its gains as the dollar regained momentum and
recovered from an earlier weakness to be up around 0.1 percent
against a basket of currencies <.DXY>. A firmer dollar makes
assets more expensive for holders of other currencies.
"The link to the dollar can exist while fundamentals are not
here, but right not with the type of weather that we have, we
have refineries increasing runs, we have strong demand for oil,"
Barret added.
Commerzbank's analyst Carsten Fritsch pointed to a generally
improving market sentiment which was seeing a rise in stocks and
other commodities with copper hitting yet another all-time high.
"This short-term correction we saw yesterday was short-lived
too, back to bullish demand," he said.
CAUTION
Traders and analysts said they were cautious ahead of a
possible Chinese interest rate rise and a meeting this weekend
of the Organisation of the Petroleum Exporting Countries, which
will look at its output targets.
OPEC appears unlikely to raise oil supply targets to cap an
oil price rally when it meets in the Ecuadorean capital Quito,
but could hint at the possibility of higher production later.
[]
"The question is if the oil prices rise well above $90 will
they (OPEC) say something about it. Saudi Arabia recently said
prices up to $90 are comfortable but not above $90," said
Fritsch.
China is widely expected to raise rates soon.
"We would be cautious going into next week, with the very
real possibility that the Chinese may move on the rate front,"
said Edward Meir, oil analyst at brokers MF Global.
"We do not think that this move is completely discounted
yet, and should it occur, it will likely cause further weakness
in Chinese equity markets, which is bound to spill over into
commodities."
A bigger-than-expected 3.8-million-barrel drop in U.S. crude
stockpiles last week also contributed to the gain in prices.
[]
(Additional reporting by Alejandro Barbajosa in Singapore;
editing by James Jukwey)
