* India lifts interest rates overnight, UK Q4 GDP shrinks
* API says crude stocks rose, distillates fell sharply
* Coming up: EIA oil data 10:30 a.m. EST Wednesday
(Updates with API inventory data, market activity, paragraphs
2, 5, 13-18)
By Robert Gibbons
NEW YORK, Jan 25 (Reuters) - Oil prices fell on Tuesday as
a contraction in Britain's economy and India's interest rate
hike to rein in inflation fueled concerns about economic growth
and the effect of rising commodity costs.
Commodity markets felt pressure from concern that monetary
tightening in India and China, intended to curb inflation,
might continue as raw materials and food costs rise. The
19-commodity Reuters Jefferies CRB index <.CRB> fell 1.5
percent, its largest one-day loss since Jan. 4.
U.S. oil fell a sixth straight session for the first time
since July 6, as investors awaited weekly oil inventory reports
expected to show crude stocks rose last week. []
U.S. crude oil for March delivery <CLc1> fell $1.68, or
1.91 percent, to settle at $86.19 a barrel, trading as low as
$86.12, lowest since prices fell to $83.63 on Dec. 1.
Traders and analysts said crude had technical support near
the March contract's 100-day moving average just above $86.
In London, ICE Brent crude for March <LCOc1> fell $1.36, or
1.41 percent, to settle at $95.25.
"Maybe, just maybe, there are still risks in this global
economy of ours," Phil Flynn, analyst at PFGBest Research in
Chicago said, referring to data showing Britain's economy
contracted in fourth-quarter 2010 as December's heavy snow took
more of a toll than forecast. []
The U.K. surprise and India's interest rate hike designed
to clamp down on inflation [] added to concerns
about slower economic growth already fanned by China's recent
efforts to curb overheated inflation.
Focus on the threat from commodity inflation to economic
growth came on the first day of the U.S. Federal Reserve's
two-day policy meeting. Investors awaited the Fed's
announcement on Wednesday at 2:25 p.m. (1915 GMT) to sift out
any policy changes.
U.S. data was mixed on Tuesday. While consumer confidence
improved more than expected in January, to its highest level in
eight months, a separate report showed U.S. home prices fell in
November, although the drop was not as sharp as expected.
[] []
U.S. OIL INVENTORY DATA EYED
The spread between the U.S. front-month March and April
crude contracts <CL-1=R> was around $1.70, keeping the
incentive in place to buy and store crude in order to sell it
at higher prices in future months.
"The WTI forward curve has steepened further at the front
end, because the front-month futures contract has come under
greater pressure than the contracts thereafter," Commerzbank
analysts said in a note.
High U.S. crude inventories, especially at the Cushing,
Oklahoma, delivery point for the U.S. crude contract, have
helped keep U.S. crude prices below Brent.
Brent crude's premium over U.S. benchmark West Texas
Intermediate (WTI) crude <CL-LCO1=R> seesawed but hovered near
$9 a barrel after reaching $9.76 on Monday.
U.S. crude oil inventories rose more than expected last
week, up by 2.1 million barrels as imports jumped 1 million
bpd, according to industry group American Petroleum Industry's
report late on Tuesday. []
But distillate inventories, which include heating oil and
diesel fuel, fell 5 million barrels, the API said, including a
2.4 million barrel slide in heating oil stocks alone,
reflecting strong heating fuel demand.
Gasoline stocks rose, the API said, but only 1.7 million
barrels, less than expected.
A Reuters analyst survey ahead of the API data had forecast
U.S. crude oil inventories to be up 1.2 million barrels.
Distillate stocks were expected to be down, but only by 300,000
barrels, with gasoline stocks seen up 2.1 million barrels.
U.S. crude prices were little changed in post-settlement
trading after the API report.
The closely watched inventory report from the U.S. Energy
Information Administration is set for release on Wednesday at
10:30 a.m. EST (1530 GMT).
(Additional reporting by Gene Ramos in New York, Zaida Espana
in London and Florence Tan in Singapore; Editing by David
Gregorio)
