* Japan Oct factory output disappoints as stimulus fades
* Technicals show prices may retrace to $84.50
[]
* Coming Up: U.S. API oil inventory report; 2130 GMT
By Alejandro Barbajosa
SINGAPORE, Nov 30 (Reuters) - Oil slipped on Tuesday,
retracing part of the sharp gains seen in the previous
session, while traders awaited further evidence that
inventories were draining amid hopes of a surge in demand for
heating in sight.
Prices climbed 2.4 percent on Monday, led by futures of
heating fuels including gas oil, as cold weather gripped
northern Europe and the U.S. Northeast, raising expectations
of higher consumption.
U.S. crude for January <CLc1> fell 51 cents to $85.22 a
barrel at at 0346 GMT after rising $1.97 on Monday, when it
briefly touched $85.90, the highest price since Nov. 12.
Prices reached a 25-month high of $88.63 on Nov. 11.
ICE Brent <LCOc1> slipped 41 cents to $86.93 after rising
more than 2 percent on Monday, when it shrugged off doubts
that Ireland's financial bailout would prevent other euro zone
crisis.
"Investors are in a wait-and-see attitude, holding for
some positive news to boost prices further," said Serene Lim,
a Singapore-based oil analyst at ANZ.
"The reason for yesterday's bullishness besides the
Ireland bailout was the cold weather in Europe. Prices were
actually boosted by fundamentals, rather than macro factors."
The euro held near a two-month low on Tuesday and major
stock indexes edged lower as fears that Ireland's fiscal
problems could spread to more euro zone countries weighed on
investor sentiment.
U.S. crude oil inventories probably fell by 400,000
barrels last week as imports dipped, a Reuters poll of
analysts showed, but analysts were divided with an equal
number of them predicting a decline and an increase.
[]
"You have to be cautious because typically at the end of
the year inventories tend to come off because of tax
purposes," Lim said. "Refiners would tend to offload their
inventories to offshore."
Stockpiles of distillates including heating oil and diesel
probably fell for a tenth consecutive week, shedding 900,000
barrels last week, the poll showed, while gasoline inventories
probably climbed 1.2 million barrels.
An industry report on inventories from the American
Petroleum Institutes (API) was due on Tuesday at 2130 GMT,
followed by government statistics from the Energy Information
Administration on Wednesday.
Cold temperatures in Northeast and northwestern Europe
provided a boost to London gas oil <LGOc1> and U.S. heating
oil <HOc1> distillate futures on Monday as the U.S. December
refined products contracts neared their Tuesday
expiration.[]
Factory output in Japan, the world's third-largest oil
user, fell in October by the most since February 2009, as
slowing exports and the diminishing effects of stimulus-driven
consumption cloud the outlook for the fragile economic
recovery. []
A Reuters oil poll showed most analysts revising price
estimates higher, while a Reuters survey of OPEC showed
slightly better compliance with production target
limits. []
OPEC president Ecuador joined a number of other oil
producers on Monday in signaling tolerance for higher prices,
saying crude could rise to $90 a barrel without endangering
the world economy if growth picks up. []
Secretive North Korea detailed for the first time its
expanded nuclear programme on Tuesday, saying it had thousands
of centrifuges as pressure built on China to rein in its ally
amid heightened tensions on the peninsula. []
(Editing by Himani Sarkar)
