* Record Cushing oil stockpiles depress WTI relative to
Brent
* China should raise interest rates -central bank adviser
* Coming Up: IEA monthly report; 0800 GMT, EIA data; 1430
GMT
(Updates prices)
By Alejandro Barbajosa
SINGAPORE, May 12 (Reuters) - Oil fell for a second
straight day on Wednesday to trade below $76 on mounting
concern that emerging economies would fail to compensate for
potential consumption declines triggered by Europe's debt
crisis.
Accelerating inflation has increased pressure on China, the
world's second-largest oil user, to tighten monetary policy and
let the yuan appreciate against the dollar, while top consumer
the United States is facing a crude glut at the Cushing,
Oklahoma, pricing point.
"We cannot depend on China to continue to support the world
economy with an EU failure," said Keichi Sano, general manager
of research at SCM Securities in Tokyo.
China should raise benchmark deposit rates as a defensive
move to stabilise inflation expectations, a central bank
adviser said in comments published on Wednesday.
[]
"China's power to push back the negative economic impact
from the EU is not so strong because they want to slowdown
economic growth and raise interest rates to deter inflationary
pressure," SCM's Sano said.
U.S. crude for delivery in June <CLc1> tumbled as much as
94 cents to $75.42 a barrel and was down 76 cents at $75.61 at
0658 GMT. That was about $4.50 lower than front-month ICE Brent
futures <LCOc1>, which slipped 31 cents to $80.18.
The premium of Brent over U.S. benchmark West Texas
Intermediate (WTI) ballooned overnight after industry group the
American Petroleum Institute (API) said on Tuesday that crude
stockpiles at Cushing rose to a new record high of more than 37
million barrels last week.
For a graph on Brent's premium over WTI:
http://graphics.thomsonreuters.com/gfx/NT_20101205134402.jpg
The discount of the front-month WTI contract to the second
month also widened sharply overnight to reach about $4 a
barrel.
ROLLER COASTER CRUDE
Oil prices have been volatile since the European Union
announced a rescue package for the bloc's debt-stricken nations
totaling almost $1 trillion two days ago. On Wednesday, prices
were less than $2 from a 12-week low reached on Friday, before
weekend talks succeeded in setting up the emergency fund.
"The market first reacted with short-covering on the news,
but then we found that the problem is still there," Sano said.
"It is still not so optimistic about the EU economy even
after the huge commitment. I'm bullish in the middle term
still, but short-term circumstances are really bad."
The U.S. Energy Information Administration (EIA) raised its
2010 world oil demand growth forecast from its previous
estimate in a monthly short-term energy outlook published on
Tuesday, when OPEC raised its own estimate for a third
consecutive month. [] []
U.S. crude had touched $87.15 on May 3, its highest level
in almost 19 months, on optimism that the global economic
recovery would boost demand after two straight years of
declines.
The API said crude stocks rose by a less-than-expected
362,000 barrels in the week to May 7, while gasoline stocks
posted a surprise drop of 906,000 barrels. Distillates, which
include heating oil and diesel fuel, edged up 94,000 barrels.
But stocks at Cushing gained 783,000 barrels. []
"Cushing stock is increasing and will continue to increase
for another two months until the refinery utilisation rates
come back," Sano said.
Government data on U.S. inventories from the EIA follows at
1430 GMT on Wednesday. The report is expected to show a
1.3-million-barrel increase in crude supplies, a gain of the
same size for distillates and an addition of 700,000 barrels
for gasoline. []
The dollar gained about 0.3 percent against a basket of
currencies on Wednesday, contributing to oil's drop because a
stronger U.S. currency renders crude imports more expensive for
developing nations where demand is soaring.
(Editing by Ed Lane)
