* Tax cuts seen boosting consumer spending, U.S. economy
* Technicals show prices may drop towards $87[]
* Coming Up: U.S. Initial jobless claims; 1330 GMT
By Alejandro Barbajosa
SINGAPORE, Dec 9 (Reuters) - Oil rebounded towards $89 on
Thursday as some optimism returned to financial markets in
Asia on hopes that the extension of U.S. tax cuts would boost
demand.
U.S. crude for December <CLc1> rose 62 cents to $88.90 a
barrel at 0304 GMT, after touching a 26-month high of $90.76
on Tuesday and falling 41 cents on Wednesday. ICE Brent crude
<LCOc1> added 41 cents to $91.18.
"When you have rising stock markets, you have the wealth
effect; consumers feel richer so their pocket books open up,"
said Tony Nunan, a risk manager with Tokyo-based Mitsubishi
Corp. "That's also positive for oil demand."
A report that inflation in China in November was lower
than expectations of 4.7 percent in a Reuters poll also
assuaged markets that an interest rate increase by the world's
second-largest oil consuming economy may not be in the offing.
China's annual inflation in November is likely to have
been "a little bit" higher than October's 4.4 percent, but
will be lower than market expectations, the official
Securities Times reported, citing unnamed authoritative
sources. The statistics will be published on Saturday.
[]
The Standard & Poor's 500 Index on Wednesday closed at its
highest level since September 2008, while Japan's Nikkei
average on Thursday climbed to a fresh seven-month high.
Gains in financial and technology stocks helped buoy Wall
Street, offsetting declines caused by the recent surge in bond
yields.
A bigger-than-expected 3.8-million-barrel drop in U.S.
crude stockpiles last week also contributed to the gain in
prices.
Total U.S. crude and product stocks fell last week by 5.3
million barrels to 1.110 billion barrels, and are down 3
percent from 20-year highs in September, the Energy
Information Administration (EIA) said on Wednesday.
Total U.S. oil product demand over the past four weeks was
up 2.9 percent from the same period last year, with distillate
demand up 5.3 percent and gasoline demand down just 0.7 percent.
Still, inventories of refined products rose last week as
refineries produced more fuel, according to weekly data from
the EIA. Gasoline rose by 3.8 million barrels and distillates
by 2.2 million, despite colder-than-normal weather in the
Northeast.
"The market tends to ignore this kind of small picture
stuff when there is a bigger picture where the stock market is
strong or Chinese demand is strong," Nunas said.
Tighter supplies in the U.S., and oil prices near 26-month
highs, could come to bear on OPEC members who meet this week
to discuss whether current oil output is high enough to meet
demand as world economies rebound.
But OPEC appears unlikely to raise oil supply limits to
cap an oil price rally when it meets in Quito on Saturday,
with ministers insisting world economic growth can hold up
with crude at $90 a barrel. []
"My expectation is that OPEC will do nothing again. They
are doing their job."
The market's attention was set to turn to U.S. initial
jobless claims later on Thursday, before Chinese trade data
for November comes out on Friday.
(Reporting by Alejandro Barbajosa; Editing by Ed Lane)
