* Oil plunges more than $1 as Shanghai shares fall 5 pct
* API data shows surprise 4.1 mln bbl US crude stock rise
* EIA figures due later to show a 1.3 million bbl
draw-poll
(Updates prices, add comments)
SINGAPORE, July 29 (Reuters) - Oil fell 2 percent to below
$66 a barrel on Wednesday, extending losses for a second day
after a sharp sell-off in buoyant Chinese shares triggered
wider losses in risk assets.
Chinese stocks fell more 5 percent, the biggest drop in
eight months, as investors took profits from a five-day
liquidity-driven rally amid worries that banks may begin to
curb lending. The Hong Kong market fell more than 3 percent.
[]
"People are panicking due to the fall in Chinese stocks,"
said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd.
But he said oil should continue to trade in a $60 to $70 range.
"There is too much exaggeration and the oil markets have
fallen too much," he said.
Equities investors worried that banks may restrict lending
to control risks as excessive liquidity threatens to fuel asset
price bubbles, a move that could also temper the rapid recovery
in the world's No. 3 economy and No. 2 oil consumer.
China's banking regulator on Tuesday urged lenders to
ensure that loans enter the real economy, rather than flow into
property and stock markets for speculation.
U.S. crude <CLc1> fell $1.32 to $65.93 a barrel by 0706
GMT, after a hitting a low of $65.51. The oil sell-off started
on Tuesday after the U.S. consumer confidence index dropped
below analysts' expectations, recording its second-straight
decline amid a difficult job market. []
London Brent <LCOc1> slid 88 cents to $69.00.
Equities markets in Asia, which had rallied for more than a
week, mostly fell for a second day, after after disappointing
corporate earnings results pushed down U.S. markets [].
"The oil market declined because of the equities market.
But that's a fickle strategy to use, and the underlying
demand-supply fundamentals are being pushed aside," said Mark
Pervan, head of Commodity Research at ANZ Bank.
Oil has also earlier fallen following bearish data from the
American Petroleum Institute (API), which reported that U.S.
crude stockpiles jumped 4.1 million barrels last week,
countering analysts' forecasts for a 1.3 million-barrel draw,
as imports rose and refiners slowed their processing rates.
[]
Traders will now look to data from the U.S. Energy
Information Administration (EIA), due at 1430 GMT, expected to
show a 1.3 million-barrel decline in crude inventories as lower
imports offset tepid refinery demand. []
A Reuters survey also forecast a 400,000-barrel rise in
gasoline stocks and a 1.3 million-barrel increase in
distillates.
(Editing by Jonathan Leff)
