* Dollar index rises, equities slip on European banking
fears
* Tropical Storm Hermine has not disrupted Gulf oil output
* U.S. Conference Board job index falls in August
* Blast rips through Mexico oil refinery
(Updates prices, recasts, adds Mexican oil refinery
explosion)
By David Sheppard
NEW YORK, Sept 7 (Reuters) - Oil fell more than $1 to below
$74 a barrel on Tuesday as renewed concerns about the health of
the European banking sector raised further doubts about the
ongoing economic recovery and the outlook for energy demand.
But an explosion at a major oil refinery in Mexico saw
prices rise off their lows on expectations Mexico will have to
import more oil products from the United States and other
trading partners in the coming months.
U.S. crude <CLc1> fell $1.01 a barrel to $73.59 at 1714
GMT, but was more than $1 above earlier low of $72.63. Brent
crude <LCOc1> was up 29 cents from Monday's close to $77.17.
There was no settlement price for U.S. crude on Monday
because of the Labor Day holiday.
U.S. and European equity markets were both down on concerns
about the banking sector after the Wall Street Journal reported
bank stress tests intended to measure the strength of major
lenders understated their holdings in potentially risky
government debt.
"Equities came off, the dollar is strong -- it's pretty much
a knock-on effect," said Rob Montefusco, an oil trader at
Sucden Financial.
Brent crude in London remained at an atypical premium to
U.S. crude as brimming inventories weighed on the U.S.
benchmark <CL-LCO1=R>. Physical crude markets in Europe are
relatively strong in part because of a tight export program
for Russian crude Urals.
A gauge of the U.S. job market declined in August,
underscoring concerns about the prospects for oil demand in the
world's top consumer.
The Conference Board, a private research group, said its
Employment Trends Index fell to 96.7 in August from a revised
97.4 in July, signaling U.S. employment growth may continue to
slow in coming months.
The dollar was up 0.6 percent against a basket of
currencies as traders shed riskier assets <.DXY>. A strong
dollar can weigh on oil as it makes crude more expensive for
other currency holders.
MEXICO EXPLOSION
Prices took some support after an explosion ripped through
a major refinery in northern Mexico on Tuesday, state oil
company Pemex [] said.
Pemex confirmed at least one person was killed in the
blast, which it said occurred following a leak in a compressor
at the diesel making unit at the refinery that resulted a brief
fire.
Rescue workers said at least five people were seriously
injured in the explosion. The Cadereyta plant is Mexico's most
complex, with a capacity of 275,000 barrels per day.
The blast could force Mexico, which already relies on
imports for more than 40 percent of domestic gasoline demand,
to significantly boost fuel imports.
(Graphic: http://link.reuters.com/dew89n )
"It could well raise oil product prices as Mexico needs to
increase imports," Antoine Halff, Deputy Head of Research at
Newedge Group in New York said.
"If the refinery is down for a long time it will almost
certainly draw oil products, especially gasoline, from the
United States. For the U.S. it could definitely be an outlet
for gasoline and other oil products where stocks are currently
very high."
Mexico bought 432,000 barrels a day of fuel from the United
States in June, making it the top importer of U.S. refined
products, according to the U.S. government.
Monday marked the end of the U.S. driving season, the period
when gasoline demand rises as people go on vacation. This, and
high unemployment in the world's top consumer, has raised
concerns about the outlook for demand.
"Figures (from the United States) started to be a little
better... But there is still no job creation, there is still a
lot a debt around," Montefusco said. "The only pick up we are
getting is coming out of Asia."
Prices took some support from hurricane fears.
Tropical Storm Hermine formed early on Monday and made
landfall in northern Mexico near the U.S. border, according to
the U.S. National Hurricane Center. It has not disrupted crude
oil and refinery output in Mexico and Texas. []
The Atlantic hurricane season runs from June 1 through Nov.
30 and is at its peak period. Traders watch out for storms
because the Gulf of Mexico is home to about 30 percent of U.S.
oil output.
(With additional reporting by Dmitry Zhdannikov and Alex
Lawler in London, Alejandro Barbajosa in Singapore; Editing by
Alden Bentley)
