Brent crude futures in London closed 32 cents higher at $21.74 a barrel, clawing back some of the losses sustained in Thursday's dramatic $1.17 fall. The losses were caused by funds selling futures in response to technical indicators, denting OPEC's hopes of keeping prices firm while they hold a tight rein on production. Sentiment has been damaged by poor refinery profit margins in the United States and an expectation among industry watchers that OPEC compliance with output limits will weaken rather than strengthen as time goes on. Buyers returned to the fray on Friday, seeing opportunities in a market underpinned by falling stockpiles of refined products at the start of the winter heating oil season.

"Both the Atlantic Basin and Pacific Basins will see progressively tighter fundamentals as inventories fall, leading to a bullish outlook," Petroleum Finance Company said.

December would see the tightest market conditions of the year as a September stockpile decline of 8,00,000 barrels per day (BPD) accelerates throughout the fourth quarter, it said.

Traders said production discipline by the OPEC would be increasingly required in the last quarter of the year when non-OPEC production was expected to rise sharply.

Consultant Petroleum Finance said non-OPEC producers would add 8,00,000 BPD of crude output in the quarter.

That could dent the impact on prices of seasonally higher demand in the fourth quarter, undermining OPEC's policy of driving prices higher, traders said.

OPEC is leaning towards extending its 4.3 million BPD in production cuts beyond the March 2000 deadline.

The first sign of how well OPEC's production discipline is holding up will come next week when the first media estimates of October production will be published.

The September figures showed some loosening of the taps, but on the whole also showed that more than 80 percent of the pledged cuts were being achieved.

OPEC, in concert with a handful of non-OPEC states, agreed last March to remove some five million barrels a day from the 75 million barrels daily world market for a year in an effort to lift prices from below $10 a barrel.