* Markets reassess fall in U.S. crude oil inventories
* EU crisis mechanism pact fails to calm euro zone fears
* U.S. jobless claims fall, factory activity rises
* Coming Up: U.S. leading economic indicators, Friday
(Recasts, updates prices, market activity to settlement)
By Gene Ramos
NEW YORK, Dec 16 (Reuters) - Oil prices dropped more than 1
percent on Thursday, as investors squared their books ahead of
the end of the year and economic worries persisted despite a
slew of positive U.S. economic data.
Market players also reassessed Wednesday's data showing
that crude inventories posted their largest weekly drop in
eight years, noting it was tax-driven and a one-off event that
will give way to higher supplies in the coming weeks.
U.S. crude for January delivery <CLc1> settled 92 cents
lower at $87.70 a barrel. The contract expires on Monday,
adding to the day's selling pressure.
Volume as of 4:30 p.m. EDT (215 GMT) was around 586,000
lots, much lower than 675,898 30-day average, preliminary
Reuters data showed.
U.S. oil prices hit a two-year high of $90.76 on Dec. 7
and have since trended lower, hitting a low of $86.83 on
Wednesday.
"I think book squaring is part of it. I have $87.94 as the
mid-point of the monthly range. A close below that I think sets
the table for further corrective weakness," said Stephen
Schork, president at the Schork Group in Villanova,
Pennsylvania.
In London, ICE Brent for January <LCOc1> expired 49 cents
lower to settle at $91.71.
Brent's premium against U.S. benchmark West Texas
Intermediate rose further to a fresh seven-month high at $4.01
at the close, from $3.58 on Wednesday, the highest since May
14. The premium has risen as stocks at the U.S.-traded oil
delivery hub in Cushing, Oklahoma, rose nearly 1 million
barrels last week, extending increases to a fifth week.
DOLLAR DIPS,
The dollar rose on a series of positive U.S. economic data,
but later came under some pressure after the Democratic-led
House of Representatives delayed debate and votes on President
Barack Obama's tax cut bill, which some economists have said
may help improve the pace of recovery. []
The euro steadied but remained vulnerable to more selling
after an agreement by European Union leaders to set up a
permanent crisis management mechanism failed to calm fears
about the region's spreading debt crisis.
U.S. economic reports showed jobless insurance claims fell
for a second week, factory activity in the Mid-Atlantic region
surged this month at its quickest pace in more than 5-1/2 years
and housing starts rose in November. []
U.S. heating oil futures edged down, with the January
contract <HOF1> ending 0.72 cent lower at $2.4763 a gallon in a
delayed reaction to Wednesday's government data showing a
surprise build last week in distillate stocks, which include
heating oil and diesel fuel, analysts said.
Temperatures will warm up slightly in the next two weeks in
the top heating oil market of the U.S. Northeast, but December
was on track to be the ninth coldest since 1950 in the region.
The January heating oil crack spread, the margin for
processing crude into fuel, closed at $16.30 a barrel, the
highest since Feb. 12, 2009, when it ended at $21.54.
The U.S. Commodity Futures Trading Commission, the top
commodities regulator, held off on moving forward with its most
aggressive measures yet to prevent speculators from distorting
commodity markets, with its chief saying the agency needed more
time to develop the controversial proposals. []
(Additional reporting by Robert Gibbons in New York; Una
Galani in London; Rebakah Kebede in Perth, Australia; Editing
by David Gregorio)
