UPDATE 1-Kazakh oil fund seen at $26 bln at year-end

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ASTANA, Nov 12 (Reuters) - Kazakhstan's state oil stability fund is likely to expand to up to $26 billion by the end of 2007, Finance Minister Natalia Korzhova said on Monday.

Kazakhstan, an oil-producing nation on the Caspian Sea with vast offshore oilfields, is using its windfall of oil revenues to accumulate cash in its rainy-day stabilisation fund to cushion its budget from a potential fall in international oil prices.

"As of Nov.1 the National Fund contained ... $20.2 billion. We expect it to grow to $25-26 billion by the end of 2007," Korzhova said in a speech in parliament.

The fund has been growing fast due to booming global oil prices and Kazakhstan's rising crude production.

Analysts closely watch Kazakh policymakers for signs they might tap into the fund to inject money in the flagging banking sector, hit hard by a global liquidity squeeze.

The country's current gold and foreign exchange reserves were $17.4 billion at the end of last month. (Reporting by Raushan Nurshayeva; Writing by Maria Golovnina in Almaty; Editing by Valerie Lee)