* U.S. refinery activity drops sharply
* China beats 2009 growth target after strong Q4
* Obama bank trading proposal may hurt commodities
(Updates with settlement prices)
By Joshua Schneyer
NEW YORK, Jan 21 (Reuters) - Oil prices fell more than 2
percent to a 2010 low around $76 a barrel on Thursday, after
government data showed a sharp drop in U.S. refining activity
to nearly its lowest level in 25 years, indicating weak demand
for fuels.
The U.S. Department of Energy reported Thursday that
refineries scaled back utilization rates by 2.9 percentage
points to 78.4 percent of capacity last week. Barring
occasional periods of hurricane-related refinery outages, the
rate was the lowest since the 1980s, according to DOE data.
"Consumer demand is weak, and it all starts from there,"
said Tim Evans, an energy analyst at Citi Futures Perspective
in New York.
U.S. crude oil for March delivery <CLc1>, the new
front-month contract, settled $1.66 lower at $76.08 a barrel,
after dipping to $75.66, the lowest price since Dec. 23.
Prices have slid sharply since crude hit a 15-month high of
$83.95 on Jan. 11. In London, Brent crude <LCOc1> fell $1.74 to
settle at $74.58 per barrel.
U.S. crude oil inventories dipped by 400,000 barrels to
330.6 million barrels last week in the world's largest energy
consumer, the DOE said, but the small unexpected crude decline
was overshadowed by the fall in refinery rates, suggesting a
fuel demand slump has continued. []
"Until we get refinery rates up, it looks like crude oil
demand is just lackluster," optionsXpress analyst Mike
Zarembski said.
Oil traders shrugged off last week's drop in U.S distillate
stocks, which include diesel and heating oil. Distillates
declined by 3.3 million barrels to 157.1 million barrels, while
gasoline inventories rose by 3.9 million barrels to 227.4
million barrels.
OBAMA PROPOSAL, STRONG DOLLAR DENT COMMODITIES
A proposal by President Barack Obama on Thursday to cut
proprietary trading at large banks that took U.S. government
bailouts over the past 18 months also led to selling of
commodities like oil.
Analysts said that big banks, which often invest tens of
millions of dollars of their own funds daily into commodities
markets, could see their trading volumes reduced if the
proposal is enacted. []
U.S. equities also fell Thursday, and the dollar's jump to
a five-month high against the euro also pressured commodities.
Commodities priced in the greenback tend to fall as the dollar
rises as they become more expensive for holders of other
currencies. []
Prices were also weighed down by concerns China will take
further measures to temper its booming economy, after it posted
double-digit growth in the fourth quarter for the first time
since 2008. []
China's annual gross domestic product growth accelerated in
the fourth quarter to 10.7 percent -- the fastest in two years
-- from a revised 9.1 percent in the third, the National Bureau
of Statistics said Thursday. []
China's economy grew by 8.7 percent for all of 2009.
For a graphic of China's GDP see:
http://graphics.thomsonreuters.com/0110/CN_GDP0110.gif
"Investors will soon have to assess whether this report --
and others like it -- will be strong enough to allow the
commodity rally to continue without alarming the authorities
even further," MF Global analyst Edward Meir said.
Prices are 47 percent below their July 2008 record high
near $150, but are than double the lows near $32 reached by the
end of that year.
(Additional reporting by David Sheppard in London and
Alejandro Barbajosa in Singapore; Editing by Walter Bagley)
