* U.S. crude stocks down 2.2 mln bbls last week -API
* Fed interest rate decision expected later on Wednesday
* Investors turn to less risky assets on economy concerns
(Adds JP Morgan outlook, updates prices)
By Alejandro Barbajosa
SINGAPORE, Jan 27 (Reuters) - Oil fell slightly on
Wednesday to stand under $75 as a firm dollar offset a surprise
drop in crude stockpiles in top consumer the United States.
The dollar was trading close to four-month highs against a
basket of currencies <.DXY>, while investors awaited the
outcome of a U.S. Federal Reserve policy meeting later in the
day.
"Over the last few days, the dollar has been stronger
because people are trying to get risk off their portfolio,"
said Keichi Sano, general manager of research at SCM Securities
in Tokyo.
"People now are in the mood of risk off, not risk on."
U.S. crude inventories unexpectedly dropped by 2.2 million
barrels last week, an industry report showed on Tuesday.
[]
U.S. oil for March delivery <CLc1> fell 4 cents to $74.67 a
barrel by 0801 GMT, after touching a five-week intraday low of
$73.82 on Tuesday. London ICE Brent for March settlement
<LCOc1> shed 7 cents to $73.22.
The Fed's Open Market Committee (FOMC) on Wednesday will
conclude a two-day meeting that is expected to yield little in
terms of a U.S. monetary policy shift.
"I don't think FOMC will give us any hint of higher
interest rates soon," Sano said. "For now, we might struggle to
go lower than $70," a barrel, he added.
INVENTORIES DECLINE
The drop in U.S. crude supplies came as imports fell by 1.5
million bpd to 8.31 million bpd, according to the American
Petroleum Institute's weekly report. Inventories were expected
to have gained 1.4 million barrels, a Reuters poll showed.
[]
Some analysts attributed the drop in crude imports to
weather-related disruptions that slowed offloading along the
U.S. Gulf Coast.
U.S. inventories of distillates, a fuel category that
includes heating oil and diesel, fell by 2 million barrels
versus forecasts of a 1.7 million-barrel decrease. Gasoline
stocks grew by 916,000 barrels, compared to expectations for a
1.1-million gain.
Traders also awaited the release of government inventory
statistics from the Energy Information Administration (EIA) at
1600 GMT on Wednesday.
FINANCIAL RESTRICTIONS
China enforced stricter reserve ratios for selected banks
on Tuesday, triggering a wave of concern that tightening
measures will restrain energy demand. Industrial and Commercial
Bank of China, the country's largest bank, has stopped rolling
over some loans. []
And last week, U.S. President Barack Obama proposed
tightening trading rules for banks.
"Possible financial restrictions on hedge funds, that is
also a concern for participants in the commodity markets," Sano
said.
The phase-out of stimulus measures in China, the world's
second-largest oil user, could jeopardise a rebound in global
oil demand. Forecasters including Goldman Sachs have
highlighted the importance of emerging markets in Asia to drain
unseasonably-high oil inventories.
The glut should subside in the first quarter of this year,
increasing the risks of a spike in crude prices and a move into
backwardation at the end of the second quarter, JPMorgan said
in a monthly report published on Tuesday. []
Crude stocks have fallen sharply from their peak at the
second quarter of last year, with Organisation for Economic
Cooperation and Development (OECD) land-based storage back to
the middle of the five-year range and floating storage possibly
as low as 20 million barrels, JP Morgan said.
(Additional reporting by Jennifer Tan)
(Editing by Clarence Fernandez)
