* Japan Oct factory output disappoints as stimulus fades
* Technicals show prices may retrace to
$84.50[]
* Coming Up: U.S. API oil inventory report; 2130 GMT
(Updates prices, adds details)
By Alejandro Barbajosa
SINGAPORE, Nov 30 (Reuters) - Oil slipped on Tuesday,
partly reversing sharp gains of the previous session, on
concerns China may raise interest rates and cap energy demand
growth, while a slowdown in Japanese and South Korean factory
output added to evidence of a slowdown in Asia.
Traders were also looking for more evidence that U.S.
inventories would drain with a surge in demand for heating.
Prices climbed 2.4 percent on Monday, led by futures of
distillate heating fuels including gas oil, as cold weather
gripped northern Europe and the U.S. Northeast, raising
expectations of higher consumption.
U.S. crude for January <CLc1> fell 25 cents to $85.48 a
barrel at at 0643 GMT after rising $1.97 on Monday, when it
briefly touched $85.90, the highest price since Nov. 12.
Prices reached a 25-month high of $88.63 on Nov. 11.
"The oil demand growth contribution from emerging Asia
next year, particularly China, implies that anything that
happens there is very important," said Serene Lim, a
Singapore-based oil analyst at ANZ.
"With much talk about China monetary policy tightening, if
that does happen it would eventually slow down economic growth
and that would impact oil demand growth."
ICE Brent <LCOc1> slipped 17 cents to $87.17 after rising
more than 2 percent on Monday, when it shrugged off fears that
Ireland's bailout might not help keep Europe's debt woes
contained.
China's key stock index fell 1.6 percent to close at a
seven-week low on Tuesday, with a shortfall of cash in the
domestic money market creating a liquidity squeeze in the
stock market. []
Analysts said the drying up of cash in the market was
prompting speculative retail investors, already on edge about
whether the central bank would introduce further tightening
measures, to sell heavily weighted financials and commodity
issues.
The euro struggled and other Asian stocks fell as fears
that Ireland's fiscal problems could spread to other weak euro
zone countries weighed on investor sentiment.
END-OF-YEAR INVENTORIES
U.S. crude oil inventories probably fell by 400,000
barrels last week as imports dipped, a Reuters poll of
analysts showed, but analysts were divided with an equal
number of them predicting a decline and an increase.
[]
"You have to be cautious because typically at the end of
the year inventories tend to come off because of tax
purposes," Lim said. "Refiners would tend to offload their
inventories to offshore."
Stockpiles of distillates including heating oil and diesel
probably fell for a tenth consecutive week, shedding 900,000
barrels last week, the poll showed, while gasoline inventories
probably climbed 1.2 million barrels.
An industry report on inventories from the American
Petroleum Institutes (API) was due on Tuesday at 2130 GMT,
followed by government statistics from the Energy Information
Administration on Wednesday.
Cold temperatures in Northeast and northwestern Europe
provided a boost to London gas oil <LGOc1> and U.S. heating
oil <HOc1> distillate futures on Monday as the U.S. December
refined products contracts neared their Tuesday
expiration.[]
Factories in Japan and South Korea, Asia's second- and
fourth-largest oil users, cut output in October, adding to
evidence of a slowdown and boding ill for the rest of the
world that has relied on the region to keep the global economy
humming. []
OPEC president Ecuador joined a number of other oil
producers on Monday in signaling tolerance for higher prices,
saying crude could rise to $90 a barrel without endangering
the world economy if growth picks up. []
Secretive North Korea detailed for the first time its
expanded nuclear programme on Tuesday, saying it had thousands
of centrifuges, as pressure built on China to rein in its ally
amid heightened tensions on the peninsula. []
(Editing by Himani Sarkar)
