* Chinese rate rise could slow demand in No. 2 consumer
* No OPEC action expected for now as mins shrug off $100
* St. Croix refinery restarts gasoline unit after 2 weeks
* Coming up: US oil inventory poll on Tuesday
(Updates CFTC data para)
By Jonathan Leff
NEW YORK, Dec 27 (Reuters) - Oil dipped on Monday after
briefly hitting its third successive 26-month high, ending a
five-day rally after a Chinese rate increase threatened to slow
demand and a major East Coast refinery resumed operations.
As a major blizzard in the U.S. Northeast further
diminished already thin holiday trading volume and threatened
to stoke oil demand for home heating, many traders expected the
fourth-quarter rally to quickly resume toward $100 a barrel as
key OPEC members showed no sign of moving to halt its rise.
U.S. crude for February <CLc1> fell 51 cents to settle at
$91 a barrel, after hitting an intraday peak of $91.88 -- the
highest since October 2008. It dropped to $90.81 a barrel in
after-hours trading by 3:48 a.m. EST.
ICE Brent crude <LCOc1>, which was trading on Friday when
the U.S. market was shut, rose 12 cents to $93.89 a barrel.
Prices recovered from a session low of $90.51 in a midday
bounce, but traders said that was likely just a larger order on
the slowest day of the year. Total crude trading volume was
around 160,000 lots, about one-quarter of the norm.
"In light 'tween-holiday' trading volume the shift may
represent little more than a small change in order flow," said
Tim Evans of Citi Futures.
The massive blizzard that snarled traffic and prompted the
New York Mercantile Exchange to begin floor trading two hours
later than usual was viewed a double-edged sword for oil:
lifting demand for home heating, but diminishing demand for
transport fuels as cars stayed parked and jets grounded.
"Travel demand is going to get hurt. Clearly you are going
to see some very low gasoline demand, but the question is
whether this is going to be a factor," said Peter Beutel,
president of Cameron Hanover in New Canaan, Connecticut,
estimating that East Coast fuel demand could fall by a fifth.
Demand could rise once the weather clears up, however,
analysts said, as travelers take to the roads and air to return
from weather-extended holidays.
CHINA VS OPEC
Despite the thin conditions traders had two major Christmas
factors to absorb on Monday: China's second interest rate rise
in just over two months, and an Arab oil ministers' meeting
that underscored OPEC's resistance to pumping more crude.
Although Beijing's quarter-point rate rise had been
expected as it strives to keep its economy from overheating and
temper inflation, the timing was a surprise. But most markets
took the news in stride, despite the underlying fear higher
rates could slow commodity demand. []
When China last raised interest rates in mid-October, oil
fell 4 percent, although the market soon recovered -- and has
gained over 9 percent since then.
"I think the Chinese rate thing is going to give us a
little bit more of a correction on the downside, but it's not
going to be a big bust because you'd have seen it by now," said
Edward Meir, energy and metals analyst at MF Global.
But OPEC comments at the weekend's OAPEC meeting in Cairo
lent support as Kuwait's oil minister said the global economy
could withstand an oil price of $100 a barrel. Others in the
group showed little inclination to consider raising production
before the group's next meeting in June. []
Regardless of OPEC output policy, production could rise
from Iraq, which is excluded from OPEC's system of supply curbs
as it recovers from war and sanctions, and from other big Gulf
members who may pump more oil without a change in policy.
REFINERY RESTART VS BLIZZARD DEMAND
Oil prices have climbed 27 percent since late August,
driven by the combination of a weakened U.S. dollar and
unusually cold weather in Europe and the United States that has
boosted heating fuel demand and eroded inventories.
Speculators have piled back into the market as fundamentals
improve: Money managers extended their net long NYMEX crude oil
positions to a fresh record high of 194,304 lots in the week to
Dec. 21, up a hair from the week before, data showed.
A persistent shortage of gasoline in the New York harbor
area has contributed to those gains, although some tightness
could be eased by the restart of the Hovensa St. Croix 150,000
barrel-per-day (bpd) gasoline making fluid catalytic cracker on
Dec. 24 after an outage of over two weeks.
U.S. gasoline futures for January <RBc1> fell 2.17 cents,
or 0.9 percent, to $2.4209 a gallon on Monday, outpacing
crude's 0.56 percent losses.
Heating oil also fell, with traders looking beyond the
short-term heating demand boost of the first severe snowstorm
of the season in the Northeast -- the biggest heating oil
market in the world -- to more benign conditions this week.
Demand for heating oil this week will average 1.2 percent
below normal, after last week exceeding the norm by around 4
percent, the National Weather Service said. []
(Additional reporting by Randy Fabi in Singapore and Barbara
Lewis in London; Editing by Lisa Shumaker and Jim Marshall)
