* Euro gains, ECB loosens lending rules
* Europe stays in focus ahead of EU summit
* Oil supply ample, OPEC pumps more than target
(Recasts, updates prices, market activity and adds details)
By Gene Ramos
NEW YORK, June 22 (Reuters) - Brent oil futures rose above
$91 a barrel on Friday, rebounding after hitting an 18-month
low, and U.S. crude futures surged nearly 2 percent as a
potential storm threatened to disrupt production in the Gulf of
An action by the European Central Bank to ease collateral
requirements -- a move designed with Spain's woes in mind,
caused the euro to rally early and also supported oil futures.
After falling about 4 percent on Thursday oil futures
regained some composure as some buyers returned after the market
had come under oversold conditions, analysts said.
In London, August Brent crude was up $1.92 at $91.15
by 2:50 p.m. EDT (1850 GMT), having hit a session high of
$91.70. It rebounded from a session low of $88.49, the lowest
since December 2010. It is on course to end the week down more
than 6 percent.
U.S. August crude settled at $79.76, gaining $1.56,
after rising to a session high of $80.37. It slid as low as
$77.56, the lowest since Oct. 5, 2011, after dropping 4 percent
on Thursday. For the week, front-month U.S. crude fell $4.27, or
5.08 percent, the biggest weekly loss since the week to June 1,
when prices fell 8.4 percent. U.S. crude has posted two straight
"The ECB's action will add liquidity to the system, and that
is helping push up Brent futures. The oil markets are rebounding
from oversold conditions, though investors are cautions because
the market is well supplied," said Phil Flynn, an analyst at
Price Futures Group in Chicago.
At the day's lows, Brent has fallen nearly $40 from the
year's high of $128.40 hit in March. U.S crude has dropped $33
from its 2012 of $110.55 also struck in March.
In the Gulf of Mexico, the largest U.S. offshore oil port
and Murphy Oil Corp. began evacuating non-essential
personnel from their operations.
The U.S. National Hurricane Center said a low pressure
system in the Gulf, home to 20 percent of U.S. oil production
and 6u percent of natural gas output, had a 70 percent chance of
developing into a tropical cyclone over the next two days.
The Relative Strength Index, a closely watched technical
signal, showed crude futures in oversold condition -- usually a
sign that a rebound may be coming. For Brent, the index was at
23, after hitting 14 on Thursday. U.S. crude's RSI was at 30,
after posting at 22 on Thursday. The 30 level is the threshold
that indicates the onset of oversold conditions, which both
contracts last began hitting in late May.
"Technical indicators show the market is a little bit
oversold, so there could be some short-covering around," said
Tony Machacek, oil futures broker at Jefferies Bache.
"It has been a long fall, driven by global economic slowdown
and oil fundamentals, such as weaker demand from China," he
Early on Friday, oil and other commodities and global
equities came under pressure after the ratings agency Moody's
downgraded the credit ratings of 15 of the world's biggest banks
to reflect potential losses from volatile capital markets.
On Thursday, oil futures tumbled as data showed U.S. factory
output grew at its slowest pace in 11 months in June, business
activity across the euro zone shrank for a fifth straight month
and Chinese manufacturing contracted for an eighth month.
While oil demand prospects are dimming, supply of oil
remains ample. The Organization of the Petroleum Exporting
Countries is pumping about 1.6 million barrels per day (bpd)
more than the demand for its oil and its own supply target, OPEC
Much of the extra oil has come from top exporter Saudi
Arabia, as well as from an export capacity expansion in Iraq and
a recovery in Libyan output.
At its meeting last week, OPEC agreed to keep its oil output
limit at 30 million bpd, with several members urging the Saudis
to cut back supplies to reach the target.
"We are heading for a weak third and fourth quarter, so
prices could go a lot weaker," said Leo Drollas, chief economist
at the Centre for Global Energy Studies. "The Saudis at the end
of the day will have to cut back themselves."
Amid the festering euro zone debt crisis, the leaders of
Germany, France, Italy and Spain agreed on Friday on a 130
billion euros ($156 billion) package in a bid to revive economic
growth in Europe. However, they differed on whether to use euro
bonds to ease the region's debt troubles.
(Additional reporting by Alex Lawler in London and Luke
Pachymuthu in Singapore; Editing by David Gregorio and
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