* After hitting a 27-month high, oil back below $90
* API inventory data: crude down sharply, products up
* Coming up: EIA oil data report 10:30 a.m. EST Wednesday
(Updates with API inventory report results, additional
details, paragraphs 6, 7, 16-20)
By Robert Gibbons
NEW YORK, Jan 4 (Reuters) - Oil prices slid more than 2
percent on Tuesday, retreating from a 27-month high and
dropping below $90 a barrel, as profit-taking struck the
commodities complex following a rally over the thin holiday
trading period.
Investors said abrupt selling across energy, metal and
agricultural markets reflected a correction to the rally that
capped 2010, rather than a sudden reversal of the optimism that
made commodities the top asset class last year.
"Today's sharp price pullback appeared to represent a raft
of profit taking in conjunction with a broad based exit of
length off of the overall commodity base," Jim Ritterbusch,
president at Ritterbusch & Associates in Galena, Illinois, said
in a note.
Some additional pressure came from a rebound by the dollar,
which turned positive on an improving U.S. economic outlook.
(Graphic: http://r.reuters.com/ces64r)
U.S. crude oil for February delivery <CLc1> fell $2.17, or
2.37 percent, to settle at $89.38 a barrel, off an early peak
of $92.07, but settling well above the $88.36 intraday low.
The slide was the biggest single-day percentage loss since
Nov. 16, when prices closed 2.97 percent lower.
Total U.S. crude futures trading volume rebounded from thin
holiday volumes, trading 761,173 lots, well above the 250-day
average of 670,799 lots, according to Reuters data.
In London, ICE Brent crude for February <LCOc1> fell $1.31
to settle at $93.53, well off an early $95.74 peak.
Brent crude's premium to the U.S. benchmark West Texas
Intermediate crude <CL-LCO1=R> rose to as much as $4.27 a
barrel intraday on Tuesday, the highest since September, with a
tight nearby supply picture and expectations for lower Nigerian
exports [] cited as factors by brokers.
Oil prices pared losses after the December Federal Open
Market Committee minutes said the Federal Reserve would stick
to its $600 billion bond-buying program. [].
The Fed's stimulative policies are viewed as bearish for
the U.S. dollar. A weaker dollar typically lifts prices of
dollar-denominated oil because it lowers the value of
greenbacks paid producers and makes oil less expensive for
consumers using other currencies.
Copper, gold, cocoa and sugar all fell sharply. The
Reuters-Jefferies CRB index <.CRB> dropped 2 percent in its
sharpest one-day fall since mid-November. []
The retreat by U.S. oil futures came after they settled at
a 27-month peak above $91 a barrel on Monday as U.S. and
European manufacturing data suggested improving economic growth
that could bolster oil demand.
"Built into pricing for commodities was a premium for
flight to safety," said John Kilduff, a partner at Again
Capital LLC in New York.
"With the economic recovery now in plain view and equities
coming back into favor, that vestige of safety is losing its
appeal. It's happening with oil and there's a similar free fall
in precious metals."
EYEING U.S. OIL INVENTORIES
U.S. crude prices held losses in post-settlement trading
after industry group the American Petroleum Institute's weekly
inventory report showed crude oil stockpiles fell 7.5 million
barrels, much more than expected. []
Distillate stocks rose 2.2 million barrels and gasoline
stocks rose 5.6 million barrels, both up more than expected.
Ahead of weekly oil inventory reports, U.S. crude oil
stocks were estimated to have fallen by 1.8 million barrels
last week in a Reuters survey of analysts. []
Distillate stocks were expected to be up 400,000 and
gasoline stocks up 300,000 barrels.
Traders noted that there was an expectation that oil
inventories will rebound in the new year and provide pressure
on prices after companies drew down stored supplies for tax
reasons at the tail end of 2010.
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Graphic on U.S. crude stocks and price
http://r.reuters.com/keg64r
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The U.S. Energy Information Administration's report will
follow on Wednesday at 10:30 a.m. EST (1530 GMT).
(Additional reporting by the New York Energy Desk, Dmitry
Zhdannikov in London, Alejandro Barbajosa in Singapore)
