* Weekend offers "sensitive window" for rate increase -
paper
* Technicals show U.S. crude may touch $90 []
* Coming Up: U.S. API weekly oil stocks; 2130 GMT
By Alejandro Barbajosa
SINGAPORE, Dec 7 (Reuters) - Oil fell from a 26-month high
on Tuesday on reports that China, the world's second-largest
crude user, will raise interest rates as soon as this weekend,
dampening investor enthusiasm for commodities driven by Asian
demand.
In a banner headline across its front page, the China
Securities Journal said that this weekend offered a "sensitive
window" for a rate rise, which would be the country's second
in its current tightening cycle. []
The report caps weeks of speculation that China will
restrict monetary policy to control inflation in a booming
economy that has acted as one of the main engines for energy
demand growth.
U.S. crude for January <CLc1> fell as much as 0.5 percent
to $88.92 a barrel and was down 23 cents at $89.15 at 0330
GMT. It touched $89.76 on Monday, the highest intraday price
since October 2008. ICE Brent <LCOc1> declined 19 cents to
$91.26.
"China interest rates are a driver in the decline of the
oil market," said Ken Hasegawa, a commodity derivatives
manager at Japan's Newedge brokerage.
"This is a good space we have for profit taking, selling
after a two-year high. I cannot justify $90 from a fundamental
point of view, so it's possible we may reach a turning point
in the next few days."
Money managers raised their net long crude oil positions
by 20 percent on the New York Mercantile Exchange in the week
through Nov. 30, according to the Commodity Futures Trading
Commission. []
"The latest CFTC positioning data shows that tactical
investors have covered considerable short positions but have
also cut some of their long exposure," said Stefan Graber, a
commodities analyst with Credit Suisse in Singapore.
"This suggests that oil markets are unlikely to break
higher for now."
CHINESE GROWTH
China's economy will probably grow about 10 percent next
year, roughly level with a 9.9 percent pace this year even as
investment slows, a top government think-tank said.
[]
The Chinese Academy of Social Sciences also forecast that
inflation would remain moderate, with the consumer price index
rising 3.3 percent next year, up a touch from an expected 3.2
percent this year.
Tuesday's newspaper report said the timing was right for
China to raise interest rates. Official monthly economic
indicators, notably the consumer price index (CPI), are likely
to show an increase in inflationary pressure when released on
Monday, Dec. 13.
Prices on Monday rose after U.S. Federal Reserve Chairman
Ben Bernanke said the Fed could end up buying more than the
$600 billion in government bonds it has committed to purchase
if the economy fails to respond or unemployment stays too
high. []
Cold weather is expected to continue to tighten energy
supply margins in Europe as below-average temperatures lift
gas and power demand. []
U.S. heating demand was expected to be 16.3 percent above
normal for the week to Dec. 11, according to the U.S. National
Weather Service. Heating oil demand was forecast at 16.1
percent above normal for the same period. []
Freezing weather is helping drain U.S. oil inventories.
The nation's crude stockpiles likely declined last week by 1.5
million barrels as refiners reduced their imports and used up
more stored supplies to keep inventories low for year-end tax
purposes, a Reuters poll of analysts showed. []
Stockpiles of distillates including heating oil and diesel
were forecast down 400,000 barrels, extending drawdowns to the
11th consecutive week, the poll showed. Gasoline stocks likely
rose an average 900,000 barrels, up for the third week in a row.
The American Petroleum Institute will publish industry
data on inventories late on Tuesday, followed by government
statistics from the Energy Information Administration on
Wednesday.
(Editing by Michael Urquhart)
