Oil falls below $81 on lower China crude imports

 @ibtimes on August 10 2010 4:21 AM

Oil fell below $81 on Tuesday as China's crude imports slowed sharply in July, raising the prospect of less purchases by the world's second largest energy consumer as its economic growth cools in the second half.

China imported 19 million tonnes or 4.47 million barrels per day of crude oil in July, down 17.5 percent from June's record 5.4 million bpd, official data showed.

In the same month overall imports rose by 22.7 percent, well short of forecasts, helping drive down Chinese share prices .SSEC by 2.9 percent.

The market is under pressure as China is slowing down, Jonathan Barratt, managing director of Sydney-based Commodity Broking Services said, adding that this was in line with expectations.

Gordon Kwan, head of energy research at Mirae Assets Securities, played down the fall in July, pointing out that the volume was still significantly higher compared with the 18 million tonnes in May.

I don't think more year-on-year falls are likely because the comparison will get easier for the months of August and September because last year's volumes were so bad, he said.

U.S. crude for September delivery fell 57 cents to $80.91 a barrel at 0645 GMT, after settling up 78 cents at $81.48 a day earlier.

London Brent crude was down 57 cents at $80.42 a barrel.

U.S. CRUDE STOCKS SEEN LOWER

Oil is seeing some support from the possibility the U.S. Federal Reserve may signal later on Tuesday that it is ready to renew efforts to prop up a weakening economy, and its commitment to keep interest rates near zero for an extended period.

The U.S. is looking to put more stimulus in the market which will in my mind support oil prices, Barratt said.

The uncertainty over whether the Fed will start a new phase of quantitative easing led to a rebound in the U.S. dollar against major currencies on Tuesday.

A stronger dollar makes oil more expensive for holders of other currencies.

U.S. crude oil inventories likely fell last week for the second week in a row as imports dipped, a Reuters poll showed ahead of weekly inventory reports.

The average forecast called for a 1.6 million barrel decline in crude oil stockpiles for the week to August 6, according to the poll of nine analysts.

Distillate stockpiles, which include heating oil and diesel fuel, may rise for the sixth consecutive week, up 1.3 million barrels on average, the poll showed.

Gasoline inventories edged up 100,000 barrels on average, the survey showed and would extend weekly builds to the seven straight week.

The draw in crude oil and rise in products should be bullish for the market, Barratt said.

(Editing by Michael Urquhart)

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