* Dollar rises as US bonds fall, yields rise
* U.S. crude to fall towards $87-technicals []
* Coming Up: U.S. EIA oil inventory report; 1530 GMT
(Update prices, adds detail, pvs SINGAPORE)
LONDON, Dec 8 (Reuters) - Oil fell for a second day on
Wednesday as a spike in U.S. Treasury yields boosted the dollar
while a report showed a larger-than-expected increase in U.S.
gasoline stockpiles.
U.S. crude for January <CLc1> fell $53 cents to $88.16 by
1218 GMT, after touching $90.76 on Tuesday, the highest price
since October 2008. ICE Brent <LCOc1> fell 35 cents to $91.04.
U.S. Treasury prices fell and yields rose after President
Barack Obama proposed extending tax cuts aimed at supporting
economic growth, but also unleashing fears about the longer-term
rise in the national debt level.
Higher U.S. economic growth would also be positive for oil
prices. But oil continued to fall from its 26-month high reached
this week as a stronger dollar would make its purchases more
expensive in other currencies.
"There's a little less confidence about the outlook for the
U.S. economy, and the general view is that they can't afford to
extend the tax cuts. That is creating a bit of risk aversion in
the market," said Sydney-based CMC Markets analyst David Taylor.
"Although the sharp move higher in U.S. yields is dampening
some of the appeal of commodities... the broader bullish trends
are undamaged, and rather than a significant pullback,
this is likely to translate into a choppier rise," said Jordan
Kotick, head of Global Technical Analysis at Barclays.
Other investors said the downward trend could persist if
China was to raise rates to cool down growth.
"For the holiday period the main risk will come from China
as the odds for an interest hike are increasing," said Olivier
Jakob from Petromatrix.
MARKETS TIGHTEN
U.S. crude oil inventories fell much more than expected last
week but refined product stocks rose as refinery utilization
rates surged, the American Petroleum Institute (API) said on
Tuesday. []
Government data on stocks and demand is due on Wednesday
from the Energy Information Administration (EIA) at 1530 GMT.
"If the DOE (U.S. department of energy) report confirms the
API, today will be another test of the bullish resilience," said
Jakob. China, the world's No.2 oil consumer after the United
States, is due to publish November trade data on Friday.
Record production cuts by the Organization of the Petroleum
Exporting Countries at the end of 2008 kicked off a fall in U.S.
and global oil inventories that has helped support prices.
OPEC next meets on Dec. 11 in Quito, Ecuador, where it is
expected to leave output targets unchanged, as prices stay
within its preferred price range of $70-$90.
"OPEC is of the view to let it rise to about $90," Taylor
said. "There are no fundamental reasons for it to go higher."
Iran's OPEC governor said the global oil markets were
balanced and that oil consumption would rise by 1 million
barrels per day next year [] []
The U.S. government on Tuesday left its forecast for world
oil demand growth in 2011 virtually unchanged at 1.43 million
bpd for next year.
(Reporting by Dmitry Zhdannikov and Alejandro Barbajosa;
Editing by Alison Birrane)
