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RTRS: Oil down nearly $2 after recovery on rate cuts
 
By Joe Brock

LONDON (Reuters) - Oil prices on Wednesday fell nearly $2, unable to sustain a brief bounce that followed a global round of emergency interest rate cuts to try to shore up the world economy.

U.S. light crude for November delivery was down $1.86 cents at $88.20 a barrel by 9:05 a.m. EDT.

London Brent crude fell by $1.02 to $83.64.

"Looks like the rate cuts caused the bounce after important support at $86 held," said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc.

"But oil markets are backing off highs as energy demand concerns remain."

Early in the session U.S. crude had fallen by more than $4 to $86.05, its lowest since December 6, 2007, after British government action to prop up its banks failed to reassure financial markets and oil traders predicted oil demand would fall.

Financial markets rallied collectively after the U.S.-led rates cuts.

The U.S. Federal Reserve said it was cutting its key rate by 50 basis points to 1.5 percent.

Other banks cutting interest rates also included China, which reduced its key rate by 27 basis points.

Surging oil demand in China and elsewhere in Asia played a large part in oil's sustained rally that culminated in a record of $147.27 in July this year.

Many analysts had predicted fuel demand in China would remain strong even if it plummeted in the United States, the world's biggest energy consumer, but concern has mounted that the Chinese economy will not escape global economic turmoil.

Later on Wednesday, attention will turn to oil inventory data from the U.S. government's Energy Information Agency (EIA), expected to be released at 10:35 a.m. EDT. An increase in inventories could put further pressure on crude prices.

Crude stocks were expected to have risen for the second week in a row last week as imports continued to rebound after storm disruptions, a Reuters poll of 11 analysts showed.

Members of the Organization of the Petroleum Exporting Countries (OPEC) have said they have become uneasy about oil's sharp price drop from the record highs hit earlier this year.

Nigeria's oil minister on Wednesday was the latest to say OPEC might need to reduce output.

"There may be a need to intervene to balance the market if the price slide seemingly predicted on (lower) demand and over-supply continues," Odein Ajumogobia told Reuters.

OPEC's next scheduled meeting is in Algeria in December.

(Additional reporting by David Sheppard; Editing by Barbara Lewis and Anthony Barker)

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