* China rate hike impact limited on oil market -analyst
* Technicals show oil rebound before plunge []
* Coming Up: U.S. EIA oil inventory report; 1430 GMT
By Alejandro Barbajosa
SINGAPORE, Oct 20 (Reuters) - Oil rebounded on Wednesday in
reaction to the previous session's activity, when it racked up
the biggest drop since February after China surprised markets
by raising interest rates for the first time in nearly three
years.
Tuesday's move knocked down prices by more than 4 percent
to below $80 for the first time this month.
But on Wednesday U.S. crude for November <CLc1>, the front
month until the contract expires by the end of the session,
bounced back 48 cents to $79.97 a barrel by 0305 GMT, after
touching $79.25 on Tuesday, the lowest price since Sept. 30.
The more liquid December contract, which will become the front
month from Thursday, gained 39 cents to $80.55.
ICE Brent for December <LCOc1> rose 39 cents to $81.49.
China, the world's second-largest oil user, has been the
main driver of growth in the crude market so far this year, as
imports soar, while an inventory overhang in top consumer the
United States has dragged the market lower.
"It seems to me there was a very knee-jerk reaction to the
China move across all commodities, and now people are starting
to step back and think about what it actually means for Chinese
growth," said Yingxi Yu, a Singapore-based commodities analyst
with Barclays Capital.
"The answer is probably not much. The actual impact of this
rate hike might be limited, on the overall growth story in
China. I don't think fundamentally it changes the demand
story."
On the contrary, it "reflects the confidence of Chinese
policymakers that the recovery is pretty much on track," Yu
said.
U.S. crude reached a five-month high above $84 on Oct. 7 on
expectations the Federal Reserve would embark on a second round
of expansionary monetary measures to reinvigorate growth.
"We have been voicing our concerns about the sustainability
of this price move because there is still a lot uf uncertainty
about the macro backdrop," Yu said.
"This macro move in China has served to remove some
optimism in other commodities as well. People are turning their
attention again to the fact that there are tightening measures
in some parts of the world."
CHINA DRIVES MARKETS
China's rate increase reflects concern about resurgent
asset prices and could mark the start of a more aggressive
phase of monetary tightening in the world's fastest-growing
major economy. []
But China's move may be supportive for commodities in the
longer term, market participants said. []
If there was ever any doubt about China's role in driving
the stuttering global economic recovery, the impact was felt by
markets across the board. Commodities prices tumbled, stocks
turned negative in Europe and the dollar jumped on Tuesday.
[] []
Wall Street was hit by fears that U.S. banks might be on
the hook for billions of dollars in souring mortgage bonds,
driving stocks to post their biggest loss in two months.
[]
Japan's Nikkei average opened down 1.5 percent on
Wednesday, reflecting the sharp fall in U.S. shares. []
The dollar held firm in early Asian dealings on Wednesday
with investors across the region poised to cut short positions
a day after the surprise interest rate increase in China
spurred the market to lower risk exposure. []
U.S. crude inventories rose by a greater-than-expected 2.3
million barrels last week while product stocks fell despite an
increase in refinery operations, the American Petroleum
Institute (API) said on Tuesday. A Reuters survey indicated
crude stockpiles would rise by 1.9 million barrels. []
[]
Stocks of distillate fuel, including diesel and heating
oil, fell by 854,000 barrels, roughly in line with
expectations, while gasoline stocks fell by just 83,000
barrels, compared with analysts' forecasts for a 1.3-million
barrel drop.
Government data from the U.S. Energy Information
Administration (EIA) will follow at 1430 GMT on Wednesday.
(Editing by Clarence Fernandez)
