Crude boosted off lows as OPEC flirts with cutting output;

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U.S. crude futures rose more by more than $2 and Brent by more than $1 on Tuesday on the prospect of an OPEC production cut as well as on a weakening dollar and news that Libya had curbed output after rockets hit an area near a refinery.

The dollar began selling off just ahead of a meeting by the U.S. Federal Reserve, sending the euro to a near two-week high against the U.S. currency, and boosting both Brent and U.S. crude, brokers said. A weakening dollar makes it cheaper for holders of other currencies to purchase crude oil contracts priced in dollars.

Oil prices pushed higher early after OPEC Secretary General Abdallah El-Badri told reporters he expected the group to lower its oil output target to 29.5 million barrels per day (bpd) from 30 million bpd when it meets next in late November.

Crude futures got another jolt higher from news that Libya's El Sharara oil field has "slightly" reduced production after rockets hit an area near the Zawiya refinery, according to the state-run National Oil Corp (NOC). Fighting between rival armed groups hit the western town of Zawiya with several rockets landing close to the 120,000 barrels per day (bpd) refinery connected to the 340,000 bpd field.

Oil had fallen to a 26-month low the previous session and has tumbled from above $115 in June due to increasing supply and data indicating that demand growth would be sluggish.

The steep drop has prompted speculation that OPEC may cut output in support of prices, and Badri's comments marked the first official confirmation that such a move could occur. It would be the first cut by the cartel since 2008.

November Brent crude was up more than 1 percent, jumping over $99 a barrel. The October contract, which expired on Monday, had dipped to a 26-month low at $96.21 in its final session. U.S. crude for October delivery rose $1.96 to settle at $94.88 a barrel.

Brent is still down nearly 13 percent in the third quarter, its biggest such drop since the second quarter of 2012.

Badri's comments helped to offset the impact of growing supply from Libya, where output has increased to nearly 1 million bpd, and weaker-than-expected economic data from Germany, China and the United States. The U.S. crude price may gain some support from an expected fall in U.S. commercial crude oil and gasoline stockpiles last week.

--By Reuters