* EIA: U.S. crude stocks down 9.9 million barrels
* Readings on U.S. CPI, NY factory data mostly in-line
* U.S. Fed outlook, Spain fears weigh on oil
(Recasts, adds new by-line, changes dateline previously
LONDON)
By Gene Ramos
NEW YORK, Dec 15 (Reuters) - Oil prices firmed above $88 a
barrel on Wednesday after government data showed the biggest
weekly drop in U.S. crude inventories in eight years.
Upbeat data on U.S. industrial activity also helped lift
investor sentiment, which was earlier affected by U.S.
euro-zone debt worries after a warning on Spain's credit
rating.
But a stronger dollar on the heels of that warning kept
oil's gains limited.
U.S. crude for January delivery <CLc1> rose 15 cents to
$88.43 barrel by 1 p.m. EST (1800 GMT). In London, ICE Brent
January crude <LCOc1> gained 62 cents to $91.83.
"The dramatic drawdown in crude oil cannot be dismissed so
easily. This could be the fundamental catalyst to decidedly
take out the $90 barrel level," said John Kilduff, a partner at
Again Capital LLC in New York.
U.S. crude stocks fell 9.9 million barrels last week, the
biggest weekly decline since September 2002, according to data
from the U.S. Energy Information Administration. []
Refiners curbed imports and used more of stored supplies to
reduce inventories for year-end tax purposes, the data showed.
U.S. industrial output rebounded in November to post its
biggest gain since July, another sign of a faster pace of
recovery in the fourth quarter, Federal Reserve data showed.
Better than expected factory data in the New York region
also further encouraged oil investors.
A warning by ratings agency Moody's that it may downgrade
Spain's credit rating rattled oil markets earlier.
The renewed euro zone worries developed a day after the
U.S. Fed dampened expectations of rapid U.S. economic recovery,
and compelling it to stick to a program of massive government bond buying to help stimulate the economy and create jobs.
EURO DOWN VERSUS DOLLAR
The dollar was broadly higher while the euro extended
losses against the greenback on persistent worries about the
euro zone's fiscal troubles. []
Against a basket of currencies, the dollar was up 0.81
percent, aided by the positive U.S. data, even though there was
softness in the latest reading of the nation's consumer price
index. <.DXY >
A stronger dollar can depress dollar-denominated oil prices
as it makes fuel more expensive to holders of other currencies.
Strength in the greenback can also push investment into foreign
exchange markets and out of from commodities.
Freezing temperatures across the U.S. Northeast, the
biggest regional market for winter heating fuel, helped pull up
energy futures. December is on track to be the ninth coldest in
region since 1950, according to forecaster MDA EarthSat Weather
in Rockville, Md. []
Cold weather in Europe added to a brighter demand outlook
for winter fuels.
(Additional reporting by Robert Gibbons in New York; Una
Galani in London; Randy Fabi in Singapore; editing by Sofina
Mirza-Reid)
