* IMF, EU agree to Ireland bailout
* Markets worry about contagion risk
* Investors await possible China interest rate increase
(Update prices)
By Ikuko Kurahone
LONDON, Nov 22 (Reuters) - Oil slipped back below $82 on
Monday, erasing earlier gains as a brief bout of general market
optimism on a debt bailout for Ireland gave way to concern about
possible problems in other highly indebted euro zone states.
U.S. crude oil futures for January delivery <CLc1> fell 38
cents to $81.60 barrel by 1453 GMT, having risen 89 cents
earlier. ICE Brent crude futures <LCOc1> were 19 cents to
$84.15, after earlier having risen more than $1.
The European Union and International Monetary Fund agreed on
Sunday to help bail out Ireland with loans to tackle its banking
and budget crisis after the country formally requested aid. The
deal is expected to total 80 billion to 90 billion euros
($109.8-$123.6 billion). []
But many market participants were worried the rescue package
might not be effective in the long term and would not stop
markets from targeting fellow straggler Portugal.
[] []
"For this week, it will be important to see if the rescue
plan can stop a chain of risk that may spread into other euro
zone countries facing financial deterioration," Mizuho Corporate
Bank said in its daily commodities research note.
The euro erased earlier gains to a one-week high against the
dollar. European shares turned negative and U.S. stocks opened
lower. [] [] []
A stronger dollar typically pressures oil and commodities
prices, capping investors' appetite for riskier assets, and
because it makes oil more expensive for consumers outside the
United States.
Mizuho Corporate Bank also cautioned that a further
tightening by China might follow last week's increases in bank
reserve requirements. []
"There are also views that the bank reserve hikes, which
China has introduced recently, are not enough to curb
inflation," the bank said.
China is the world's top energy consumer and any slowdown in
its economy may curb oil demand.
LOWER INVENTORIES
Some analysts still pointed out some factors supportive to
oil prices.
Fredreic Lasserre, global research head for commodities at
Societe Generale, said oil inventories in the United States have
fallen to the levels below those of a year ago and the supply
overhang was becoming thinner than before. []
Fuel inventories in China also fell in October, dropping for
eight months in a row. []
Lasserre said that he expected inventories to fall to 55
days and the market to be in backwardation by the third quarter
of next year and that commodities remain a good hedge against
long-term inflation.
Elderly King Abdullah of Saudi Arabia, the world's top oil
exporter, flew to the United States on Monday for medical checks
for a back ailment, and Crown Prince Sultan returned from
holiday abroad.[]
The market reaction to concerns about the Saudi ruler's
health has so far been limited.
(Additional reporting by Florence Tan and Luke Pachymuthu in
Singapore; editing by Keiron Henderson)
