* Oil falls for second day after breaking 8-day rally
* API crude stocks up 3.8 mln bbls, twice forecast; EIA
eyed
(Updates prices)
By Nick Trevethan
SINGAPORE, Oct 21 (Reuters) - U.S. crude futures dropped
just under half a percent to below $79 a barrel on Wednesday,
extending the previous session's losses away from a 1-year peak
after a bigger-than-expected rise in U.S. crude oil
inventories.
"There is plenty of oil around at the moment and the
current price is associated with tight supply, so I am a little
bearish and I suspect it will adjust lower," said David Moore,
commodities strategist at Commonwealth Bank in Sydney.
"However, the market sentiment is still very positive and
it's hard to dispel that without a trigger. The API data showed
a large stock build and if confirmed by the Energy Information
Administration, that could be bearish in the very short term."
NYMEX crude for the new front month December <CLc1> fell 33
cents to $78.79 a barrel by 0625 GMT, after the American
Petroleum Institute said late on Tuesday that crude stocks rose
3.8 million barrels, far more than the 1.8 million barrel build
forecast in a Reuters poll. [] []
On Tuesday, the November contract hit $80.05, a 12-month
high for the front month on a continuation basis. Brent crude
<LCOc1> lost 29 cents to $76.95.
The Energy Information Administration, a U.S. government
agency, will issue its own report later on Wednesday.
But pullbacks should be seen as buying opportunities as
crude heads back to $100 a barrel, Richard Ross, global
technical strategist at Auerbach Grayson in New York, said.
The persistent weakness in the U.S. dollar, global strength
in equities, absence of overhead resistance, powerful momentum
and mounting evidence of real economic recovery pointed to a
bullish outlook for crude, he said in a research note.
[]
That view was echoed by BP's chief economist, who also saw
strong prices over the coming months, driven by expectations of
growing demand and a relatively high level of OPEC output
discipline. []
In the short term, sentiment was also knocked by a steadier
tone to the dollar, which retreated from 14-month lows <.DXY>
and weakness in U.S. equity markets, both of which have been
key drivers in lifting oil by 11 percent so far in October.
On the supply side, the dramatic slide in Mexico's oil
production since 2004 has come to an end and the country will
maintain output at 2.5 million barrels per day for the coming
years, Energy Minister Georgina Kessel said on Tuesday.
"I am convinced this is a reasonable baseline and that we
can work with it for the coming years," Kessel told Reuters in
an interview. []
The rapid decline in Mexican production and a dearth of
promising new fields to offset Cantarell had led to fears the
number four supplier of crude to the United States will soon be
an importer itself.
(Editing by Michael Urquhart)
