Oil slips back to below $54 after 9% surge

OIL LATEST: Traders are looking ahead to OPEC's informal meeting on Saturday for signs of another output cut. (Getty Images)

Oil slipped back to $54 a barrel on Tuesday, chipping away at a near 10 percent rally after a rebound in equity markets and expectations of another OPEC cut helped the market to its biggest two-day gain in two months.

Oil prices leapt by 9.1 percent on Monday after Washington agreed to pump $20 billion into struggling Citigroup, the second-largest US bank, sending the US dollar to a two-week low against the euro and making oil more attractive.

US light crude for January delivery fell 56 cents to $53.94 a barrel by 6.07am UAE time, having rebounded from the three and a half year low of $48.25 it hit on Friday.

Prices have tumbled by nearly $100 from their record high in July as the global economic crisis eats into demand in consumer nations.

London Brent crude slipped 28 cents to $53.65.

Oil traders are now looking ahead to Saturday's informal OPEC meeting in Cairo for further action from the cartel, which agreed a 1.5 million barrels per day cut in oil production from Nov. 1, supply curbs that may not be fully felt until December or even January when oil reaches refineries worldwide.

Analysts were divided over whether further action was immiment, with 8 of 15 oil analysts polled by Reuters saying OPEC would likely wait until its policy-setting meeting in Oran on Dec. 17 to tighten supplies further.

"The only support is coming from OPEC. And the market might have to wait for the second cut," said French bank Societe Generale in a research report.

The weakness of the oil market calls for another OPEC cut of more than one million barrels per day (bpd), the group's president, Chakib Khelil, said on Monday, but added the precise amount would only become clear in December.

Oil prices have not risen for more than two days in a row since mid-September, with fleeting rallies quickly sold as investors flee riskier markets or sell commodities to cover falling equity positions. (Reuters)

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