By Jane Merriman
LONDON (Reuters) - Oil retreated from session highs on Thursday, pressured by expectations that demand will fall sharply if the credit crisis pushes the global economy into recession.
Prices had dropped to 10-month lows this week, which prompted OPEC to consider holding talks to review output.
U.S. light crude for November delivery was $1.25 lower at $87.70 a barrel by 10:30 a.m. EDT. On Wednesday it hit a 10-month low of $86.05.
London Brent crude was down $1.01 at $83.35 a barrel.
Oil has dropped about 40 percent from a peak of $147.27 a barrel in July.
Venezuelan President Hugo Chavez has said OPEC is calling for an extraordinary meeting and some other members of the Organization of the Petroleum Exporting Countries have said the group should meet in November to discuss the impact of the financial crisis.
"OPEC members will have an emergency meeting to review oil market conditions in mid-November in Vienna," Iran's oil minister Gholamhossein Nozari told official IRNA news agency.
Nigeria, Qatar and Iraq, all members of the group, on Wednesday floated the idea of a cut in output.
"It will be interesting to see how the cartel juggles things in a down market," said Edward Meir of broker MF Global.
"Much will ride on the Saudis and whether they will agree to restrain their massive production," he said. "We suspect they will resist sharp cutbacks."
A much larger than expected rise in crude and gasoline inventories last week in top energy consumer the United States provided evidence that demand is slowing as the credit crisis starts to affect the wider economy.
The International Monetary Fund has warned that the world economy is set for a major downturn after the problems in the banking sector.
Central banks around the world have cut interest rates to try to ease the strains on the financial system and the United States may consider taking stakes in debt-laden banks.
U.S. shares were firmer, while gold, a traditional safe-haven investment, slipped back, suggesting action by governments around the world to try to ease the credit crisis might have begun to have some impact on investor sentiment.
(Additional reporting by Annika Breidthardt in Singapore; editing by James Jukwey)
