* China Oct crude imports fall below 4 million bpd
* Technicals show price decline to about $85
[]
* Coming Up: U.S. EIA oil inventory report; 1530 GMT
(Adds inventories, demand forecasts ahead of EIA report)
By Alejandro Barbajosa
SINGAPORE, Nov 10 (Reuters) - Oil fell for a second day on
Wednesday after China's crude imports tumbled last month and
the dollar strengthened, reining in the bullish effect of a
surprise drop in inventories in top consumer the United States.
U.S. crude for December <CLc1> declined as much as 0.6
percent to $86.17 and was down 22 cents at $86.50 a barrel by
0623 GMT, after reaching $87.63 on Tuesday, its highest since
October 2008. ICE Brent <LCOc1> fell 29 cents to $88.04.
China's crude imports fell 30 percent in October to 16.39
million tonnes, the lowest in at least 18 months, or 3.86
million barrels per day (bpd), from a record 5.67 million bpd
in September, customs data showed on Wednesday. []
The dollar gained about 0.4 percent against a basket of
currencies <.DXY>, blunting the appeal of commodities as an
investment and offsetting a drop of 7.4 million barrels in U.S.
crude stockpiles last week, as reported by the American
Petroleum Institute (API) late on Tuesday. []
"With China coming off, combined with a stronger dollar, we
should have a downward correction," said Tony Nunan, a risk
manager with Tokyo-based Mitsubishi Corp. "The market went up
too much over the past couple of weeks."
Last week, U.S. crude prices posted a 6.6 percent gain, the
biggest percentage weekly gain since February.
Analysts and investors including Mitsubishi's Nunan warned
against reading too much into a single set of trade data from
China, the world's second-largest oil user.
IN LINE WITH TREND
The average of Chinese crude imports for September and
October, at 19.84 million tonnes, is roughly in line with
totals seen for the first eight months of the year at 19.73
million, suggesting re-stocking took place in the month before
October's week-long National Day celebrations.
"There just seems to be so much volatility in those
numbers," Nunan said. "I'm still bullish on China. You have to
take a long-term view. We are now solidly in the $80s."
Global oil supplies will come close to a peak by 2035 when
prices will top $200 a barrel, the International Energy Agency
said in its 2010 World Energy Outlook (WEO), as China and other
emerging economies drive demand higher. []
Conventional crude oil output has already peaked and would
flatten out in the next 10 years, the IEA said on Tuesday,
boosting reliance on costlier and more polluting unconventional
sources such as oil sands.
Tuesday's API industry report pointed to tightening fuel
supplies in the United States. Stockpiles of distillates,
including heating oil and diesel, dropped by 4 million barrels
in the week to Nov. 5, while gasoline inventories slipped 3.4
million barrels.
Markets await confirmation of this declining trend across
fuel categories from the U.S. Energy Information
Administration, set to release government data on inventories
and demand on Wednesday at 1530 GMT.
"If you have some confidence that the worst is over in
terms of inventories, it's pretty important for price," Nunan
said.
"If things get really in sync between China and the U.S.,
the biggest engine of growth and the biggest slice of the pie,
then we can go another $5 higher."
U.S. crude inventories were forecast to be have increased
by 1.4 million barrels last week, a Reuters analyst survey
showed, while stocks of distillates including heating oil and
diesel were expected to have declined by 1.9 million barrels.
Gasoline stockpiles were forecast to have dropped 800,000
barrels. []
The EIA raised its 2011 world oil demand forecast by 33,000
barrels per day, to 87.77 million bpd, from its previous
monthly forecast, and now sees a year-on-year rise of 1.44
million bpd. []
(Editing by Clarence Fernandez)
