Brent climbs above $80.50 after China rate cuts; OPEC meet eyed

By Henning Gloystein

SINGAPORE (Reuters) - Brent crude futures rose above $80.50 a barrel on Monday ahead of a meeting of the producer group OPEC at which an output cut will be discussed, while China's move to lower interest rates late last week also underpinned prices.

Asian markets rallied on Monday with shares in Shanghai hitting three-year highs as the prospect of further policy stimulus in China and Europe whetted risk appetites globally while sending the euro skidding.

Oil markets, however, remained more hesitant. Brent saw only a slight rise on Monday, with analysts saying supply and demand fundamentals were preventing further rallies.

Brent was trading at $80.60 a barrel at 0730 GMT, up 24 cents but off a more than one-week top of $81.61 reached on Friday. U.S. crude was up 21 cents to $76.72 a barrel.

"China's surprise rate cut might provide some initial support to commodities, but weak domestic demand and tight credit conditions will likely continue to weigh on sentiment," ANZ bank said in a research note.

FOCUS ON OPEC

Analysts said market focus this week would be on whether the Organization of the Petroleum Exporting Countries' (OPEC) cuts output at its meeting in Vienna on Nov. 27 to stop the recent price falls which have hurt oil export revenues of its 12 member states.

French bank Societe Generale said an OPEC production cut of over 1 million barrels per day was needed to balance the market, which it estimated with a probability of 60 percent to happen.

Since June, oil has lost 30 percent in value, with Brent plunging from a high above $115 and U.S. crude from above $107.

OPEC members Iran, Libya and Venezuela have urged fellow crude producers to support oil prices through production cuts, while Kuwait has said an output reduction is unlikely.

Key will be the position of the club's biggest producer and exporter Saudi Arabia, which has so far sent mixed messages.

If there is no intervention by OPEC, analysts said oil prices could fall lower still and that market fundamentals implied lower prices even if OPEC cuts output.

"We're in the middle of a very fundamental change in the oil markets - the type of change that only happens every decade or two," Societe Generale said, adding that Brent prices could fall as low as $70 and U.S. prices to $60-$65.

(Editing by Himani Sarkar)