CORRECTED: Oil steady at $96

(Corrects GMT time in paragraph 2) By Fayen Wong

SYDNEY (Reuters) - Oil was steady at $96 a barrel on Monday, heading for its biggest annual gain this decade as growing geopolitical concerns and dwindling consumer nation stockpiles outweighed the risk of a softening U.S. economy.

U.S. light crude for February delivery trimmed earlier gains to stand 5 cents higher at $96.05 a barrel by 0302 GMT.

London Brent crude rose 9 cents to $93.97 a barrel.

Oil prices are up 57 percent since the start of the year and touched a record high of $99.29 on November 21 as a falling U.S. dollar and thinning inventories stoked investor interest.

Geopolitics roared back to the fore last week, with instability in nuclear-armed Pakistan depressing the dollar and lifting oil, while Iran's plan to start its first atomic power plant next year highlighted the risks facing the OPEC member.

Prices fell 62 cents on Friday, ending a four-day rally, after data showing a 9 percent decline in sales of new U.S. homes last month heightened fears of the economy going into recession.

While prices have been buoyed by a slump in U.S. crude stocks to below their seasonal norms, some analysts are already looking beyond the peak demand winter season.

"We do see this squeeze starting to ease in the new year, as the peak of the heating season will pass in 3-4 weeks, more U.S. refineries come back into service in 2008, and the focus shifts back to gasoline inventories," said First Energy Capital analyst Martin King.

If prices hold, they will register their best performance for a front-month contract since 1999, when oil prices more than doubled as they rocketed back from a $10 low. Oil rose by 57.3 percent in 2002, their strongest gain this decade.

On an average basis, 2007 will set another record at just above $72.36, up about 9 percent from 2006.

In January, as futures prices tumbled, analysts had expected prices to fall to an average $63.23 a barrel this year, according to a Reuters poll. The latest poll showed a consensus forecast for a rise in prices to $77.62 a barrel next year.

PAKISTAN, IRAN

Pakistani electoral officials hold an emergency meeting on Monday to decide whether to proceed with a January poll after the nation was plunged into crisis by the assassination of former prime minister and opposition leader Benazir Bhutto.

Bhutto's party named her 19-year-old son and husband on Sunday to succeed her, but doubts grew about whether a January 8 poll aiming to transform Pakistan from military rule would go ahead.

While Pakistan is not a major crude producer, escalating tensions after Bhutto's assassination have stoked supply concerns in the region.