Sept. 12 (Bloomberg) -- Crude oil rose amid a foiled attack on the U.S. Embassy in Damascus and as OPEC ministers said they may reduce production if prices continue to drop quickly.

Terrorists attacked the embassy in the Syrian capital, exchanging gunfire with security forces, the U.S. State Department said. The incident is over and the embassy is secure, the State Department said in a statement.

``The market is very volatile for any nervousness in the world,'' Kevin Blemkin, a broker with Man Group Plc, said by phone from London.

Crude oil for October delivery rose as much as 83 cents, or 1.3 percent, to $66.44 a barrel in after-hours electronic trading on the New York Mercantile Exchange in London. It traded at $65.96 at 10:33 a.m. Brent crude for October settlement rose 33 cents to $64.88 a barrel on London's ICE Futures Exchange. The contract expires on Sept. 14.

Members of the Organization of Petroleum Exporting Countries, which pumps 40 percent of the world's oil, decided yesterday to keep production quotas unchanged. The group wants prices to stay above $60 a barrel, Iranian Oil Minister Kazem Vaziri-Hamaneh told reporters today in Vienna, speaking through a translator,

``The price we favor is not below $60'' a barrel, for OPEC's basket oil price, Vaziri-Hamaneh said. ``Supply is more than demand and stocks are at a very high level, and because of these two factors, prices are very fragile.''

Oil pared early gains today as the International Energy Agency cut global oil demand estimates for 2006 and 2007, spurred by a slowdown in the U.S., the world's largest energy consumer.

IEA Forecast

Worldwide oil demand will be 84.7 million barrels a day for 2006, 100,000 barrels a day fewer than estimated last month, the Paris-based IEA wrote today in a monthly report. Oil consumption next year was cut by 160,000 barrels a day to 86.2 million, the e- mailed document said.

Oil fell for a sixth day yesterday, in part because there is less concern that Iran will reduce oil exports in a dispute with the United Nations about the country's nuclear research.

The U.S. may open negotiations over Iran's nuclear program if it can verify that uranium enrichment has stopped, Secretary of State Condoleezza Rice said yesterday.

Iran may halt its nuclear program for two months if the UN drops moves to impose sanctions, Agence France-Presse reported.

Vaziri-Hamaneh said that his country, the fourth-largest oil producer, will not disrupt oil exports. ``There is no discussion of Iran using oil as a weapon,'' he said.

Stocks and Storms

Oil has declined 16 percent from a high July 14 of $78.40 a barrel as fuel stockpiles in the U.S., the world's largest energy consumer, have stayed above seasonal averages. The price also declined as the U.S. hurricane season has not harmed oil facilities in the Gulf of Mexico.

``The market is still weak in respect of the Iran situation,'' Blemkin said. ``Hurricanes don't appear to be what they were last time, so the fear factor of that part is taken out of the market.''

Prices began rebounding earlier in the day as charts traders use to predict price movements suggested prices may rise. The 30- day relative strength index, which attempts to identify possible turning points in prices, fell to 38.1 yesterday, its lowest this year. When the index reached its previous year-to-date low of 40.4 on Feb. 15, prices rose 6 percent in three days.

``Oil became clearly oversold yesterday,'' said Dariusz Kowalczyk, chief investment strategist at CFCSeymour Ltd., citing the relative strength index among technical measures he uses to forecast prices. ``That's triggered a rebound.''

Relative Strength Index

The relative strength index calculates the degree a security's daily gain outpaces its daily losses over a given period, or the extent by which losses outpace gains. A reading above 60 suggests a security may be poised to fall. A reading below 40 indicates it may be set to rise.

An Energy Department report tomorrow will probably show gasoline stockpiles gained for a fourth time last week, rising by 500,000 barrels, based on the median estimate from a Bloomberg News survey of eight analysts. U.S. gasoline inventories held 206.9 million barrels on Sept. 1, 4.2 percent more than the five- year average for the period.

Oil supplies probably fell by 2 million barrels. Stockpiles held 330.6 million barrels the week before, 12 percent more than the five-year average.

To contact the reporter on this story: Oliver Klaus in London at oklaus@bloomberg.net

Last Updated: September 12, 2006 05:40 EDT