* U.S. crude inventories jump 7.5 mln bbls- API
* Investors await EU summit Thursday
* Coming Up: EIA stockpile report at 1430 GMT
(Adds Japan imports, updates prices)
By Alejandro Barbajosa
SINGAPORE, March 24 (Reuters) - Oil fell towards $81 on
Wednesday after a report showed U.S. crude inventories surged,
deepening concerns about a demand recovery from industrialised
nations as Europe struggles to manage Greece's debt crisis.
The front-month U.S. crude contract <CLc1> fell 63 cents to
$81.28 a barrel at 0715 GMT, having traded between $69 and $84
so far this year. London ICE Brent <LCOc1> for May slid 55
cents to $80.15.
U.S. crude stockpiles jumped 7.5 million barrels the week
ended March 19, five times as much as forecast in a Reuters
poll <API/S>, the American Petroleum Institute (API) said on
Tuesday.
Supplies of distillates including heating oil and diesel
fell 2.5 million barrels while gasoline stocks were little
changed.
"If you just add up 7.5 minus 2.5 you have a net increase
of 5 million, and that is pretty big," said Tony Nunan, a risk
manager with Tokyo-based Mitsubishi Corp.
"Refiners are trying to maintain their margins by cutting
crude runs to keep product inventories down," Nunan said,
adding that U.S. stockpiles are still "much higher" than their
five-year average.
The dollar strengthened against a basket of currencies
<.DXY>, curbing the appeal of commodities for investors.
European Union leaders are scheduled to meet on Thursday to
discuss how to help Greece deal with its debt crisis and
prevent contagion.
"When people are concerned about Greece, they are also
concerned about the economic health of Europe and consequently
oil demand," Nunan said.
U.S. crude runs -- which measures demand for crude oil
input by domestic refiners -- fell by 24,000 barrels per day
(bpd) last week, the industry-funded API said.
Refinery utilisation dropped by 0.5 percentage point to
80.8 percent of capacity, while analysts were looking for an
unchanged reading.
Oil traders will be seeking confirmation of these numbers
from weekly government statistics that will be published by the
U.S. Energy Information Administration (EIA) on Wednesday at
1430 GMT.
DOLLAR OVERDONE?
Some investors say the inverse relationship between the
dollar and oil in the past few years is starting to break.
"Pointing to the strengthening dollar when oil is falling
is kind of overdone," Nunan said.
"I am starting to get sceptical about that. The stronger
dollar is not the cause, but it is more that they are moving in
a similar fashion", affected by weak European growth prospects,
he said.
Higher-than-average stocks of heating fuels have been
partially absorbed by an unusually cold winter across the
northern hemisphere and rising demand from emerging Asian
economies.
But U.S. crude stockpiles continue to expand due to growing
imports as the Organization of the Petroleum Exporting
Countries (OPEC) exceeds output targets.
"Crude imports have to slow down, but if that happens, the
crude gets backed up somewhere else," Nunan said. "If Asia can
absorb that, fine, but if not, OPEC needs to cut
overproduction."
OPEC ministers have said they expect oil prices to stay
around current levels for the rest of the year. The group
agreed to leave production targets unchanged last week citing
accelerating demand growth in the second half and continued
economic uncertainty. OPEC plans to meet again in October.
"It's a push and pull between short-term oversupply versus
expectations of medium-term tightness," Nunan said.
The volume of Japan's customs-cleared crude oil imports
last month fell 5.7 percent year-on-year to 17.874 million
kilolitres (4.02 million barrels per day), the lowest tally for
February since 1989, the nation's finance ministry said on
Wednesday. []
(Editing by Ed Lane, Himani Sarkar)
