* EIA: U.S. crude stocks down 9.9 million barrels
* U.S. industrial, regional manufacturing data supports
* Spain debt worries, U.S. Fed outlook weigh on oil
* Coming Up: U.S. jobless claims data on Thursday
(Recasts, updates with settlement prices, market activity)
By Gene Ramos
NEW YORK, Dec 15 (Reuters) - Oil prices rebounded on
Wednesday as U.S. crude inventories posted their biggest weekly
decline in eight years, but gains were tempered by a stronger
dollar.
Upbeat data on U.S. industrial and regional manufacturing
activity also encouraged oil investors, outweighing earlier
worries on euro-zone debt after a warning on Spain's credit
rating.
U.S. crude for January delivery <CLc1> settled 34 cents
higher at $88.62 a barrel. Trading volume hit 714,043 lots,
almost 6 percent above the 30-day average of 673,970.
In London, ICE Brent January crude <LCOc1> ended up 99
cents at $92.20.
"The dramatic drawdown in crude oil cannot be dismissed so
easily." 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.
"Refiners have apparently decided to meet their crude
demand from the large overhang of stocks and domestic
production," said Bill O'Grady, chief investment strategist at
Confluence Investment Management in St. Louis, Missouri.
U.S. crude imports fell as shipments from Canada, the top
supplier, fell 19 percent, due to pipeline snags on the
Enbridge <ENB.TO> system that delivers most of Canada's
shipments to the U.S.
But stocks at the key storage hub in Cushing, Oklahoma, the
delivery point for oil traded on the New York Mercantile
Exchange, rose 982,000 barrels last week, increasing for the
fifth week in a row to hit the highest level since August.
That helped push up Brent's premium over the U.S. benchmark
West Texas Intermediate crude to $3.58 a barrel at the close,
from $2.93 on Tuesday, marking the highest since May 14.
POSITIVE U.S. DATA, EURO ZONE WORRIES
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.
The dollar was broadly higher while the euro was more than
1 percent lower against the greenback on persistent worries
about the euro zone's fiscal troubles. []
Against a basket of currencies, the dollar surged 1.1
percent, aided by the positive U.S. data, even though there was
mild gain in consumer prices. <.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.
In New York, heating oil for January delivery <HOF1> gained
1.56 cents to end at $2.4835 a gallon, its highest since Dec.
3. The heating oil crack spread <CL-HO1=R>, the margin refiners
make from processing crude to fuel, hit a high of $15.83 a
barrel, also the loftiest since Dec. 3.
(Additional reporting by Robert Gibbons in New York; Una
Galani in London; Randy Fabi in Singapore; editing by
Marguerita Choy)
