* 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)
By Francis Kan
SINGAPORE, April 18 (Reuters) - U.S. Brent crude slipped
below $123 a barrel on Monday as fears that high prices would
dampen demand overrode concerns over a cut in oil output from
top oil exporter Saudi Arabia.
The kingdom reduced output by 800,000 barrels per day (bpd)
to 8.292 million bpd in March from February, Saudi Oil Minister
Ali al-Naimi said on Sunday, 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 from a 32-month peak of $127.02 hit earlier this
month.
ICE Brent crude <LCOc1> was down 49 cents at $122.99 a
barrel by 0641 GMT. U.S. crude <CLc1> fell 74 cents to $108.92 a
barrel.
Brent 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 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 were the clearest indication yet that OPEC is
unconvinced of a need for a coordinated change in supply policy
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 a close replacement for very
high quality Libyan sweet crude oil lost due to the conflict in
the North African nation, OPEC Secretary General Abdullah
Al-Badri said on Monday. []
Refiners have shown little appetite for a replacement bend
offered by Saudi Arabia to plug the gap.
"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 was muted as further tightening in Chinese monetary
policy was widely expected, analysts said.
Stock markets in both China and Hong Kong
also took the news in their stride and were trading higher on
the day after opening down.
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. []
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)
