* Saudi cuts output, believes market is well-supplied
* Impact of China bank reserves hike muted
* For a 24-hour technical outlook on oil: http://graphics.thomsonreuters.com/WT1/20111804085912.jpg
* Coming Up: Euro zone April consumer confidence; 1400 GMT
* U.S. April NAHB housing market index; 1400 GMT
(Updates prices, adds OPEC Secretary General comments)
By Francis Kan
SINGAPORE, April 18 (Reuters) - U.S. crude futures slipped
below $109 a barrel on Monday after three days of gains, as
fears that high prices would dampen demand overrode concerns
over a cut in oil output.
Saudi Arabia's oil minister said on Sunday the kingdom had
slashed output by 800,000 barrels per day in March due to
oversupply, sending the strongest signal yet that OPEC will not
act to rein in soaring prices. []
"The market had a great run on Friday, but oil continues to
underpin inflationary fears as people start to worry how high
it's going to get," said Ben Le Brun, market analyst with CMC
Markets in Sydney.
Oil prices fell early last week on concern that demand may
be eroding under pressure from high prices, but rebounded on
Friday following encouraging U.S. economic data. Prices have
retreated after hitting a 2-1/2 year peak of $113.46 earlier
this month.
U.S. crude futures <CLc1> for May fell 76 cents to $108.90 a
barrel by 0546 GMT, after falling as much as 94 cents earlier.
ICE Brent crude <LCOc1> for June was down 57 cents at
$122.88 a barrel. The contract gained as much as 21 cents in
early trade.
Brent oil may revisit a recent low at $120 per barrel,
while U.S. oil <CLc1> is expected to retrace to $108 per barrel,
according to Reuters market analyst Wang Tao.
[][]
SAUDI OUTPUT
Oil Ministers from Kuwait and the United Arab Emirates
echoed Saudi Arabia's Ali al-Naimi's concerns about oversupply
and said rocketing crude prices were out of the hands of OPEC,
which next meets in June.
Naimi's words are the clearest indication yet that OPEC is
unconvinced there is a need for more oil despite the civil war
that has slashed Libyan output and expectations Japanese demand
will rise as the country scrambles to rebuild its
earthquake-shattered electricity grid.
"The Saudis believe that there is a massive premium because
of tensions in the Middle East and that demand is waning at
these prices. We think the premium is around $15-$20 a barrel,"
said Le Brun.
The conflict in Libya escalated over the weekend, after
Libyan leader Muammar Gaddafi's forces fired rockets on Sunday
at rebels stationed along the edge of Ajdabiyah, sending some
residents fleeing from the eastern town, witnesses said.
[]
The oil market is still seeking an appropriate replacement
for very high quality Libyan sweet crude oil lost due to the
conflict in the North African nation and refiners are not buying
proposed replacements, OPEC Secretary General Abdullah Al-Badri
said on Monday. []
"The Saudis have spare capacity but there is a quality
mismatch between what refiners want and what the Saudis can
provide," said Michael Lo, a Hong Kong-based analyst with Nomura
International.
CHINA RAISES BANK RESERVES
China raised banks' required reserves on Sunday for the
fourth time this year to curb inflation, but the impact on oil
prices is expected to be muted as it was widely expected,
analysts said.
"The market would have taken the news in its stride. I don't
think there will be any significant impact on prices as it's a
move that was widely anticipated," said Lo.
Reflecting this sentiment, both Chinese and Hong
Kong stocks were trading higher on the day after opening
lower.
The reserve rate rise, which followed an increase in
benchmark bank interest rates on April 5, was the seventh since
China stepped up efforts against inflation in October and
underscored the government's determination to keep the economy
on an even keel. []
Asian equities edged up on Monday, receiving a boost from a
strong Wall Street close, riding on the back of encouraging U.S.
data.
The market will be closely watching a clutch of key U.S.
corporate earnings during this holiday-shortened week to gauge
the impact of high oil and commodities prices on the world's
biggest energy consumer.
(Editing by Clarence Fernandez, Himani Sarkar)
