Oil rallies sharply on lower U.S. production, OPEC concerns

By Robert Gibbons

NEW YORK (Reuters) - Oil prices rallied sharply on Monday, erasing earlier losses on data showing contracting U.S. production and OPEC willingness to talk with other producers about falling prices.

Crude futures rebounded after retreating early Monday on concerns about China's economy that pressured global equities along with a global supply glut.

After crude futures ended last week with the biggest two-day rally in six years, trading was volatile on Monday as a British public holiday curbed volume.

U.S. domestic crude oil production peaked at just above 9.6 million barrels per day (bpd) in April before falling by more than 300,000 bpd over the following two months, Energy Information Administration (EIA) data showed on Monday.

Excess supply has weighed on oil, with OPEC's forecasts pointing to an oversupply of more than 2 million bpd.

OPEC expressed concern on Monday about oil's price drop and said the group is ready to talk to other producers about it.

"The EIA data showed U.S. production may be responding to lower prices more than thought and the OPEC comments are supportive" said Phil Flynn, analyst at Price Futures Group in Chicago.

Brent October crude was up $2.50 at $52.55 a barrel at 11:57 a.m. EDT (1557 GMT), having swung from $48.25 to $52.70.

Brent needs to finish above $52.21 to avoid a fourth straight monthly loss.

U.S. October crude was up $2.45 at $47.67, trading from $43.60 to $47.88.

A finish above $47.12 would prevent U.S. crude posting a loss in August.

(Additional reporting by Alex Lawler in London and Keith Wallis; Editing by Marguerita Choy)