* U.K., France may give out statement on Ireland on Friday
* Technicals show oil headed towards $86.34 []
* Coming Up: IEA November oil market report
(Adds JP Morgan's comments, China trade data, updates prices)
By Alejandro Barbajosa
SINGAPORE, Nov 12 (Reuters) - Oil dropped as much as 1.8
percent on Friday, erasing this week's gain to two-year highs,
as concerns about Irish debt sent investors scrambling for the
safety of the dollar, unwinding positions across commodities.
U.S. crude for December <CLc1> fell as much $1.56 to $86.25
a barrel and was down $1.29 at $86.52 at 0510 GMT, after
touching an intra-day peak of $88.63 on Thursday, the highest
prices since October 2008. ICE Brent <LCOc1> slid $1.07 to
$87.74.
Attention in the oil market refocused on risk aversion and
macroeconomic concerns at the end of a week when price action
was dominated by the fundamentals of crude, with Chinese demand
at a record and U.S. inventories plunging.
The dollar gained 0.2 percent against a basket of
currencies on Friday as the euro tumbled to a six-week low
against the U.S. currency, shedding about 2.6 percent this week
on fears Ireland may need a bailout just like Greece.
[] <.DXY>
"It's just a correction after the big rebound the euro had
against the U.S. dollar," said Ken Hasegawa, a commodity
derivatives manager at Japan's Newedge brokerage.
"The big issue is the worries about Ireland's economy. It
seems to be worse than expected, and that is the reason why the
euro is falling. In addition, technically some selling orders
have been triggered across all commodities."
U.S. crude's Relative Strength Index (RSI) edged up to
67.74 at the close on Thursday, approaching the 70 level that
is usually interpreted as a signal the market is overbought and
subject to a price correction.
Traders slowed their selling of euros a bit on Friday after
knocking the currency down 4 cents in the past week, squaring
up before a statement about Ireland that may be issued by
Britain and France later in the day. []
PRICE DROP NOT SURPRISING
"We saw big gains in the euro and commodities as well, then
it is not so surprising if the market goes down suddenly,"
Hasegawa said. "If some bad news comes into the markets, prices
will fall again."
Concerns about Ireland overshadowed a Group of 20 leaders'
summit in Seoul, where a breakthrough on resolving global
economic imbalances amid incongruent policies looked
unattainable. []
Oil had rallied for most of the past two weeks, partly on
signs that the Organization of the Petroleum ExporTing
Countries (OPEC) can tolerate higher oil prices and on a plan
by the U.S. Federal Reserve to buy $600 billion in Treasury
bonds to help speed economic growth.
China's industrial production grew 13.1 percent in October
from a year earlier, sending oil usage in the world's second
biggest consumer to a record 8.92 million barrels per day
(bpd). [] []
Chinese demand was fueled mainly by a record refinery
throughput of 8.72 million bpd, up 12.2 percent from a year
earlier, government data showed on Thursday.
For details on China economy/trade data for October, click:
http://link.reuters.com/qan84q
"The similarities with crude oil in the second half of
2007, when prices moved from $75 to $100 a barrel, are
manifold," JP Morgan analysts led by Lawrence Eagles said in a
weekly report.
"Rampant emerging market growth, OPEC reluctant to raise
output, and policy shifts and price caps in China leading to
regional shortages."
But "one big difference between 2007 and 2010 is that there
is no question that OPEC has the spare capacity to hike crude
oil output next year -- and could quash this nascent rally in
its tracks."
OPEC, which meets in Quito, Ecuador, on Dec. 11, in a
monthly report released Thursday raised its forecast of global
oil demand next year by about 310,000 bpd to 86.95 million bpd,
and increased its estimate of consumption this year by around
190,000 bpd, to 85.78 million bpd. []
(Editing by Manash Goswami)
