* Technicals show prices may drop towards $87[]
* Investors wary of possible Chinese rate rise, OPEC meeting
* Coming Up: U.S. Initial jobless claims; 1330 GMT
(Updates throughout, changes dateline, pvs SINGAPORE)
By Christopher Johnson
LONDON, Dec 9 (Reuters) - Oil climbed more than $1 to around
$89 on Thursday as the dollar weakened and stock markets rose on
some hopes for higher economic growth.
European shares hit a 26-month high on Thursday and Asian
markets closed higher, boosted by expectations that economic
stimulus combined with U.S. tax cuts would boost consumption in
the world's biggest oil consumer. [] []
The dollar slipped against a basket of currencies <.DXY> as
U.S. Treasury yields eased after a-23 basis point surge on
Wednesday. [/FRX]
Benchmark U.S. light crude oil futures for January <CLc1>
rose more than $1 to a high of $89.42, up $1.14, before moving
back to around $89.08 by 0904 GMT.
The front-month contract touched a 26-month high of $90.76
on Tuesday and fell 41 cents on Wednesday, pulled lower in part
by concerns about a growing U.S. deficit.
ICE Brent crude <LCOc1> added 67 cents to $91.44.
Traders and analysts said they were cautious ahead of a
possible Chinese interest rate rise and a meeting this weekend
of the Organization of the Petroleum Exporting Countries, which
will look at its output targets.
OPEC appears unlikely to raise oil supply targets to cap an
oil price rally when it meets in the Ecuadorean capital Quito,
but could hint at the possibility of higher production later.
[]
CAUTION
China is widely expected to raise rates soon.
"We would be cautious going into next week, with the very
real possibility that the Chinese may move on the rate front,"
said Edward Meir, oil analyst at brokers MF Global.
"We do not think that this move is completely discounted
yet, and should it occur, it will likely cause further weakness
in Chinese equity markets, which is bound to spill over into
commodities."
A report that inflation in China in November was lower than
expectations of 4.7 percent in a Reuters poll also reassured
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. []
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 financial world is becoming split between investors who
are deeply concerned that a proposal from U.S. President Barack
Obama to extend tax cuts will worsen a budget shortfall, and
investors who are relieved that U.S. authorities are trying to
use fiscal and monetary medicine for the economy. []
Oil markets over the past 24 hours have shifted from
focusing on the first scenario to paying more attention to the
rosier picture painted by the second one.
The oil 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.
(Additional reporting by Alejandro Barbajosa in Singapore;
editing by Keiron Henderson)
