* China rate hike impact limited on oil market -analyst
* Oil to rebound before falling -technicals []
* 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 drop, the biggest since
February after China surprised markets by raising interest
rates for the first time in nearly three years.
U.S. crude for November <CLc1>, the front month until the
contract expires by the end of the session, bounced 66 cents to
$80.15 a barrel by 0458 GMT, after falling more than 4 percent
on Tuesday to below $80 for the first time this month. The
price touched $79.25, the lowest level since Sept. 30.
"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.
The more liquid December U.S. crude contract <CLc2>, which
will become the front month from Thursday, gained 62 cents to
$80.78 on Wednesday, while ICE Brent for December <LCOc1> rose
63 cents to $81.73.
CHINA DRIVES MARKETS
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.
U.S. crude reached a five-month high above $84 on Oct. 7 on
expectations the Federal Reserve would this year embark on a
second round of expansionary monetary measures to boost growth.
"We have been voicing our concerns about the sustainability
of this price move because there is still a lot of 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'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. Stocks turned negative in Europe and
the dollar jumped on Tuesday. [] []
Wall Street was also 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.
[]
Asian stocks fell on Wednesday, with Japan's Nikkei average
tumbling over 2 percent, as investors fretted that China may be
embarking on a policy tightening cycle. []
The dollar dipped against a basket of currencies, trimming
the previous session's gains, but was seen likely to stay
supported due to the potential for further short-covering.
[]
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' forecast 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 Manash Goswami)
