* Unexpected distillate stock increase sends oil to below
$80
* More Chinese tightening, higher bank reserve requirements
* Winter conditions seen milder this week
By Alejandro Barbajosa
SINGAPORE, Jan 13 (Reuters) - Oil fell more than $1 on
Wednesday to below $80 a barrel, after an industry group
reported an unexpected increase in U.S. distillate inventories,
adding to growing fuel supplies despite the severe winter.
Prices also declined after China surprised world markets by
raising banks' reserve requirements, the strongest of a series
of step towards tightening monetary policy, raising concern
that such cooling off measures would damp energy demand.
U.S. crude for February delivery <CLc1> fell as much as
$1.01 a barrel to $79.78, the lowest since Jan. 4. It was
trading down 93 cents at $79.86 a barrel by 0338 GMT.
London Brent crude for February <LCOc1>, which expires on
Thursday, shed 82 cents to $78.48 a barrel.
"The market is trading in the $75-$85 range, and if we are
getting warmer weather, higher inventories and Chinese monetary
policy is changing, then we should now try the lower side of
that range," said Keichi Sano, general manager of research at
SCM Securities in Tokyo.
China, the world's No. 2 oil consumer, raised the
proportion of deposits that banks must hold in reserve by 0.5
percentage point in a move to stem inflation threats.
Concerns that Chinese tightening could limit the global
economic recovery unnerved financial markets, denting stocks,
higher-yielding currencies and commodities. []
[]
Gold, which slid more than 2 percent the previous day --
the largest one-day percentage drop since Dec. 17 on China's
tightening moves -- was flat on Wednesday. []
"The Chinese economy is an extraordinary buyer of
commodities and energy, so people are very concerned about its
growth pace," Sano said.
HIGHER INVENTORIES
Distillate stockpiles in the United States rose by 3.6
million barrels in the week ended Jan. 8, the American
Petroleum Institute (API) said on Tuesday, versus forecasts for
a 1.8 million-barrel drop.
The rise came despite the freezing weather in the past two
weeks. And a weather pattern change during the next several
days will end the very cold weather across central and eastern
United States, DTN Meteorlogix said, reducing heating demand.
[]
Crude inventories gained 1.2 million barrels as imports
increased, while gasoline stocks soared by a hefty 6.8 million
barrels, compared with expectations for a 1.2 million-barrel
increase.
Government inventory statistics from the Energy Information
Administration (EIA) will be published by 1530 GMT.
Deutsche Bank, in a research note, said it expected
fundamentals of oil supply, demand and inventories -- which
remain well above five-year averages -- to assert heavier
influence on prices in 2010, tempering any price rallies.
"In our view, this would mean that rallies in the oil price
above $80 a barrel will only become sustainable in 2011,"
Deutsche said in a 2010 commodities outlook.
The EIA, in a monthly report Tuesday, cut a previous
forecast for world oil demand growth in 2010 by 20,000 barrels
per day (bpd), although it still predicts demand growth of 1.08
million bpd versus last year. []
(Editing by Ramthan Hussain)
