* Investors bullish on U.S., focus on Chinese inflation
* Retail sales suggest economic recovery gaining traction
* U.S. Fed Reserve announcement due at 1915 GMT []
* Coming Up: API inventory report at 2130 GMT
(Adds comment, updates prices)
By Una Galani
LONDON, Dec 14 (Reuters) - Oil prices dipped on Tuesday as
the dollar rose following stronger-than-expected U.S. economic
data and as investors remained wary over the prospect of an
interest rate rise in China.
U.S. retail sales increased 0.8 percent, advancing for a
fifth straight month, and core producer prices also rose 0.3
percent in November suggesting an acceleration in economic
growth in the world's largest oil consuming nation.
[]
"A better-than-expected retail sales report provided a boost
to the dollar and put some pressure on oil," said Gene
McGillian, analyst at Tradition Energy in Stamford, Connecticut.
The Federal Reserve is also expected to revise its economic
outlook later today to reflect stronger growth after recently
agreeing to extend tax breaks, effectively delivering fresh
fiscal stimulus. []
The dollar was up 0.2 percent against a basket of currencies
<.DXY>. After holding steady, U.S. crude for January <CLc1> fell
69 cents to $87.92 a barrel by 1445 GMT. ICE Brent <LCOc1>
slipped 31 cents to $90.88.
China's decision so far to hold back from hiking interest
rates despite data at the weekend which showed inflation at a
28-month high in November of 5.1 percent has acted as an
additional support to prices, analysts said.
The positive sentiment from financial markets will not,
however, be enough to sustain an oil price above $90 unless
supported by strong fundamentals while downside financial risk
from the European debt crisis remains, analysts warned.
"The support is coming from the financial side. I would not
be surprised to see the oil prices stagnating or even falling
(in the coming days)," Eugen Weinberg, head of commodity
research at Commerzbank in Frankfurt told Reuters, adding supply
and demand did not justify the current price levels.
HUNDRED DOLLAR OIL
That view was echoed in a note to clients by JBC Energy
which said that while $100 will be targeted in 2011 there was a
case for a price correction in the coming weeks despite cold
weather across much of the northern hemisphere keeping heating
demand above average for this time of year. []
U.S inventory data from industry body the American Petroleum
Institute was due out at 2130 GMT.
U.S. crude oil stocks were expected to have fallen last
week, according to a Reuters survey of analysts. Crude stocks
were estimated to be lower by 2.2 million barrels, with
distillate stockpiles seen down 500,000 barrels. []
Gasoline stockpiles were expected to be have risen by 1.8
million barrels. []
While it is unclear how quickly China will move to tackle
inflation, the market appears to agree that monetary tightening
will not be aggressive.
Investors polled by Reuters expect China to raise interest
rates before the end of this year, but then to increase them
twice more in 2011. []
That echoes comments made to Reuters on Tuesday by Chen
Dongqi, a senior government researcher, who said China would
steer clear of an aggressive increase of benchmark interest
rates because higher rates will only attract additional hot
money inflows. []
Analysts are gradually raising their oil price outlooks for
next year.
Credit Suisse said on Tuesday it had raised its 2011
forecast for U.S. crude futures to $85 per barrel, an increase
of $12.50, citing a recovery in global oil demand.
[]
The price forecast was raised "to reflect a recovery in OECD
demand (notably in North America) and continued strength in the
non-OECD (notably Asia)", it said in a note.
It also increased its 2011 outlook for ICE Brent by $12.7
per barrel to $84.5.
(Additional reporting by Rebekah Kebede in Perth; Robert
Gibbons in New York; editing by Christopher Johnson and Keiron
Henderson)
