* Concerns over persistent oversupply in oil
* Economy seen recovering, but jitters over China
* Markets need to see convincing recovery for oil to top
$75
By Ramthan Hussain
SINGAPORE, Aug 27 (Reuters) - Oil fell towards $71 on
Thursday, extending losses by more than $3 after touching a
10-month high this week, as rising crude and diesel stocks
eclipsed healthy economic data from the United States and
Europe.
Investors are also edgy about the pace of economic recovery
in China, a likely clampdown on lending and plans to curtail
overcapacity, prompting falls in equities markets in Shanghai,
Hong Kong and Japan.
U.S. crude for October <CLc1> fell 15 cents to $71.28 a
barrel by 0234 GMT, retreating further from $75 hit earlier
this week, the higest level since October. Brent crude <LCOc1>
fell 20 cents to $71.45 a barrel.
"The question is whether both the commodities and equities
markets have priced in the turnaround in the U.S. housing
markets and other data," said Ben Westmore, commodities analyst
with National Australia Bank.
He was referring to better-than-expected gains in U.S.
housing prices, an increase in durable goods orders and
consumer confidence this week, lending new credence to the view
that the economy is emerging from recession.
"I don't think the markets will move much more on that."
Eyes will now be on the U.S. GDP and jobless claims data
later on Thursday, as well as German consumer sentiment.
Stirring concerns over the growth of the world's No. 2
energy consumer, the Chinese cabinet said on Wednesday it would
take steps to curb redundant investment and overcapacity in
industries ranging from steel to wind power
equipment.[] []
The decision came amid fears that China's $585 billion
stimulus plan and a surge in new lending in the first half
could trigger wasteful investment and a new crop of bad loans.
It followed Premier Wen Jiabao's remarks that the economy faces
new difficulties, including trouble boosting domestic
consumption.
Westmore said the oil markets were still weighed down by
overcapacity, as shown by recent crude and products inventory
data in the world's largest consumer.
U.S. crude inventories rose by 200,000 barrels last week
due to a rebound in imports weaker demand from refiners, Energy
Information Administration (EIA) data showed, versus analyst
expectations for a 1.1 million-barrel decline.
Stocks of middle distillates, which include diesel and
heating oil, rose by 800,000 barrels to total 162.4 million
barrels last week, up over 30 million barrels against last
year, and topping projections of a 300,000-barrel build.
Gasoline stocks fell by a larger-than-expected 1.7 million
barrels, against an expected 1 million-barrel fall.
About 72 million barrels of gas oil for heating and jet
fuel are also being stored in tankers globally, up from around
62 million barrels in June, at a time of uncertain demand from
markets in the West going into the peak winter period.
On current fundamentals, traders do not see prices breaking
$75, the level at which they have been taking profits after oil
jumped almost 130 percent from the lows at the turn of the
year.
(Editing by Clarence Fernandez)
