Crude Oil Rises, Halts 14% Slide Over Three Days as Stocks Gain

By Margot Habiby and Samantha Zee

Oct. 17 (Bloomberg) -- Crude oil rebounded above $70 a barrel, halting a 14 percent price slide over the past three days, as U.S. stocks rose on prospects of a government bailout of bond insurers.

Oil gained for the first day in four after the Dow Jones Industrial Average recovered from a decline of as much as 380 points, spurred by the biggest drop in industrial production in 34 years. Yesterday, oil touched the lowest since June 2007 as the U.S. said supplies rose more than twice as much as forecast.

``As investors see the stock market recover, they want to buy into oil on the perception that the stock market movements are indicative of the future direction of oil,'' said Andy Lipow, president of Houston-based Lipow Oil Associates LLC in Houston.

Crude oil for November delivery rose $2.85, or 4.1 percent, to $72.70 a barrel at 9:35 a.m. Sydney time on the New York Mercantile Exchange after touching $72.95 a barrel. Yesterday it fell $4.69, or 6.3 percent, to $69.85 a barrel, the lowest settlement since Aug. 23, 2007. Oil touched $68.57 a barrel, the lowest intraday price since June 27, 2007.

Also supporting prices, the Organization of Petroleum Exporting Countries moved its planned emergency meeting forward to Oct. 24 from Nov. 18 to address price declines.

OPEC ``is concerned about crude's rapid price drop, and they may announce a production cut,'' Lipow said.

One Million Barrels

The organization will likely reduce oil output by 1 million barrels a day at next week's meeting to check the drop in prices, Qatari Oil Minister Abdullah al-Attiyah said.

``It will be one million, or more,'' he told Qatar's al- Jazeera television channel. ``Prices have fallen a lot and we need to take measures.''

Oil supplies rose 5.6 million barrels to 308.2 million barrels last week, the Department of Energy said in a weekly report yesterday. Crude oil inventories were forecast to rise 2.6 million barrels, according to the median of analyst estimates in a Bloomberg News survey.

About 39 percent of oil production in the U.S. Gulf of Mexico remained shut in after Hurricanes Gustav and Ike, which hit Louisiana and Texas last month, the U.S. Minerals Management Service said.

Brent crude oil for November settlement declined $4.48, or 6.3 percent, to settle at $66.32 a barrel on London's ICE Futures Europe exchange yesterday, the lowest closing price since May 10, 2007.

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net; Samantha Zee in Los Angeles at szee@bloomberg.net.