* Oil and stocks recover despite stronger dollar
* U.S. tax cuts boost economic recovery hopes
* Coming Up: U.S. EIA oil inventory report; 1530 GMT
(Releads with prices, adds quotes, details)
By Dmitry Zhdannikov
LONDON, Dec 8 (Reuters) - Oil recovered from earlier losses
on Wednesday despite a stronger dollar on optimism that U.S tax
cuts will help revive economic growth while cold weather would
continue supporting demand.
U.S. crude for January <CLc1> traded flat at $88.69 while
ICE Brent <LCOc1> was at $91.45 at 1440 GMT after having fallen
by around $1 earlier. Oil reached a 26-month high this week.
"The US government extended both tax-cuts from the Bush-era
and the jobless benefits, which are generally both positive for
the U.S. oil demand," said James Zhang from Standard Bank.
President Barack Obama's proposal to extend tax cuts was
several times reinterpreted by the market as it aims to support
economic growth, but also unleashed fears about the longer-term
rise in U.S. debt.
The latter fears caused a spike in U.S. Treasury yields
earlier on Wednesday and boosted the dollar <.DXY>, which was
still up 0.3 percent against a basket of currencies at 1420 GMT
although stocks and U.S. bonds turned positive to flat.
"Although the sharp move higher in U.S. yields is dampening
some of the appeal of commodities...the broader bullish trends
are undamaged, and rather than a significant pullback,
this is likely to translate into a choppier rise," said Jordan
Kotick, head of Global Technical Analysis at Barclays.
Other investors said the downward trend could persist if
China was to raise rates to cool down growth.
"For the holiday period the main risk will come from China
as the odds for an interest rate hike are increasing," said
Olivier Jakob from Petromatrix.
Barclays, however, said cold weather could support prices.
"Further cold weather forecasts are likely to remain
supportive for oil prices, with the market tightness continuing
to be highlighted through the backwardated shape of the curve,"
said Amrita Sen.
MARKETS TIGHTEN
U.S. crude oil inventories fell much more than expected last
week but refined product stocks rose as refinery utilization
rates surged, the American Petroleum Institute (API) said on
Tuesday. []
Government data on stocks and demand is due on Wednesday
from the Energy Information Administration (EIA) at 1530 GMT.
"If the DOE (U.S. department of energy) report confirms the
API, today will be another test of the bullish resilience," said
Jakob. China, the world's No.2 oil consumer after the United
States, is due to publish November trade data on Friday.
Record production cuts by the Organization of the Petroleum
Exporting Countries at the end of 2008 kicked off a fall in U.S.
and global oil inventories that has helped support prices.
OPEC next meets on Dec. 11 in Quito, Ecuador, where it is
expected to leave output targets unchanged, as prices stay
within its preferred price range of $70-$90.
"OPEC is of the view to let it rise to about $90," Taylor
said. "There are no fundamental reasons for it to go higher."
Iran's OPEC governor said the global oil markets were
balanced and that oil consumption would rise by 1 million
barrels per day next year [] []
The U.S. government on Tuesday left its forecast for world
oil demand growth in 2011 virtually unchanged at 1.43 million
bpd for next year.
(Reporting by Dmitry Zhdannikov and Alejandro Barbajosa;
Editing by Alison Birrane and Sue Thomas)
