* Spain debt worries, fears of eurozone contagion weigh
* U.S. data shows higher industrial output, low inflation
* Markets re-evaluate fall in U.S. crude oil inventories
* Coming up: U.S. jobless claims and housing data; 1330 GMT
(Adds fresh comment, updates prices)
By Una Galani
LONDON, Dec 16 (Reuters) - Oil fell to around $88 a barrel
on Thursday as mounting concerns over the debt-crisis in the
eurozone overshadowed a large fall in crude oil stocks in the
United States last week.
Investors were cautious a day after Spain was warned by
Moody's that it faced a downgrade to its credit rating.
European leaders will begin a two-day meeting in Brussels on
Thursday to try and agree the next steps in tackling the crisis.
[]
"Today we have the re-evaluation of yesterday's weekly
(U.S. inventory) statistics, which I think were in fact not that
bullish," said Christophe Barret, a global oil analyst at Credit
Agricole.
He added that concerns over the eurozone outweighed other
positive data from the U.S. which showed that industrial output
was higher and inflation low in the world's largest oil
consuming nation.
Ratings agency Moody's said it did not expect Madrid would
have to follow Greece and Ireland and accept a bailout from the
European Union bailout, but it could not be ruled out.
[]
U.S. crude for January <CLc1> fell 44 cents to $88.18 a
barrel by 1146 GMT. ICE Brent <LCOc1>, which expires on
Thursday, dropped 34 cents to $91.86.
In a note to clients, Stefan Graber, an analyst at Credit
Suisse, warned that the 9.85 million barrel plunge in weekly
U.S. crude oil stocks which drove oil prices up almost $1 on
Wednesday was seasonal, due to a sharp drop in imports, and
could be temporary. []
NEUTRAL
"The net position is pretty much neutral at the moment, but
it seems to be reasonably supported around the $88 per barrel
mark," said David Taylor an analyst at CMC Markets in Sydney.
The eurozone concerns also weighed on the dollar, which
traded down 0.2 percent against a basket of currencies.
A weaker dollar can often strengthen dollar-denominated oil
prices as it makes fuel cheaper for holders of other currencies.
Weakness in the greenback can also push investment out of
foreign exchange markets and into commodities.
U.S. industrial output rebounded in November to post its
biggest gain since July, another sign of a faster pace of
recovery in the fourth quarter, Federal Reserve data showed.
[]
Government data also showed that inflation was low, with
consumer prices posting a mild gain. []
The U.S. futures regulator, the Commodity Futures Trading
Commission, on Wednesday announced a postponement of contentious
reforms that will limit the positions any one investor can hold
in commodity markets. []
The latest U.S. jobless claims and housing statistics are
due out at 1330 GMT.
(Additional reporting by Rebakah Kebede; editing by William
Hardy)
