* Dollar strengthens to five-month high vs. euro
* China bank lending curbs cause jitters
* U.S. inventory reports expected to show build in stocks
(Updates prices at settlement, inventory poll)
By Edward McAllister
NEW YORK, Jan 20 (Reuters) - Oil prices fell below $78 a
barrel on Wednesday as the dollar strengthened and Wall Street
slipped on worries about bank lending curbs in China.
U.S. crude for February delivery <CLc1>, which expired on
Wednesday, fell $1.40 to settle at $77.62 a barrel. March crude
<CLc2> fell $1.58 to settle at $77.74. In London, Brent crude
<LCOc1> for March delivery lost $1.31 to settle at $76.32 a
barrel.
U.S. equities suffered their worst slide of 2010 on
Wednesday as investors worried that bank lending restrictions
in China could hurt the global economic recovery. []
New U.S. housing starts unexpectedly fell in December
[], while U.S. producer prices rose 0.2 percent
last month. []
Investors have looked to wider economic data over the past
year for signs of economic recovery and a potential rebound in
energy demand.
"The petroleum markets continue to take much of their
guidance from the financial markets, with both the retreat in
the equity markets and the firmer U.S. dollar prompting
short-term traders to sell petroleum," said Tim Evans, energy
analyst at Citi Futures Perspective in New York.
Book squaring on front-month February crude ahead of expiry
was contributing to the day's volatility, Evans added.
The euro fell to fresh five-month lows against the dollar
on Wednesday as markets worried about Greece's public finances
[]. Over the past year, oil prices have frequently weakened
as the dollar firmed, at times signaling a flight to safer
havens by investors.
"We're starting to see the commodity trade come off, mostly
on the stronger dollar," said market analyst Michael Hewson at
CMC Markets in London.
CHINESE CREDIT
Chinese banking authorities instructed some major banks to
stop new lending for the rest of January, after loan growth
surged in the first few weeks of the year, official media and
banking sources said on Wednesday. []
Last week China raised bank reserve requirements for the
first time since June 2008. []
"China's plans to tighten credit markets continue to cause
concern, meaning that the release of (Chinese) GDP and other
economic data tomorrow will have to be very bullish to offset
this," said David Wech, head of energy studies at JBC Energy in
Vienna.
China's December economic indicators were to be published
late on Wednesday. Analysts say Chinese industrial production
probably grew at its fastest pace in almost four years, jumping
by 20 percent in the year to December, compared with a reading
of 19.2 percent in November. []
RISING STOCKPILES
U.S. crude inventories likely rose for a third straight
week as imports increased and refinery utilization fell with
the start of the maintenance season, an updated Reuters poll of
analysts showed. []
U.S. inventory reports were expected from the American
Petroleum Institute later on Wednesday and from the Energy
Information Administration on Thursday.
U.S. crude stockpiles were expected to have gained 2.4
million barrels on average in the week ended Jan. 15, a survey
of sixteen analysts showed.
Distillate stocks were projected down 100,000 barrels,
while gasoline stocks probably rose 1.7 million barrels.
The country's refinery utilization was forecast to have
fallen 0.4 percentage point to below 81 percent of capacity.
Some U.S. refineries have begun their first-quarter
maintenance, with the goal of retooling for gasoline production
ahead of the summer driving season.
(Additional reporting by Gene Ramos in New York, Chris Baldwin
in London and Alejandro Barbajosa in Singapore; editing by Jim
Marshall and Walter Bagley)
