* Dollar strength weighs on prices
* European oil demand posts historic drop in Jan- Barclays
* Coming Up: European Union summit
(Adds background on Chinese demand, updates prices)
By Alejandro Barbajosa
SINGAPORE, March 25 (Reuters) - Oil extended losses on
Thursday as a jump in U.S. crude inventories indicated demand
was slow to pick up in the world's top consumer, while Europe's
fiscal troubles continued to dampen expectations for growth.
A strong dollar also weighed on prices. The greenback held
its strength against major currencies with the euro falling to
a 10-month low against the dollar as investors remained
sceptical about whether the EU will agree on a quick rescue
plan for heavily indebted Greece at a summit this week. []
U.S. crude inventories rose more than forecast last week,
a government report showed on Wednesday. []
"Crude inventory gains surpassed most estimates and that
indicates that the economic recovery has not really translated
into a crude oil demand increase," said Serene Lim, a
Singapore-based oil analyst at ANZ.
"Prices will be within a range between $78 and $82 unless
the dollar gains further."
U.S. crude for May delivery <CLc1> shed 13 cents to $80.48
a barrel at 0510 GMT, having traded in a range of between $69
and $84 for all of this year. ICE London Brent for May <LCOc1>
declined 16 cents to $79.46.
Commercial crude oil stockpiles in the United States jumped
by 7.3 million barrels to 351.3 million barrels in the March 19
week, the Energy Information Administration (EIA) said on
Wednesday, eclipsing analysts' average expectations of a 1.5
million-barrel rise.
Gasoline stockpiles dropped by a larger-than-expected 2.7
million barrels, while distillates including heating oil and
diesel shed 2.4 million barrels, falling for an eighth
consecutive week.
EUROPEAN MALAISE
EIA data also showed total U.S. oil consumption increased
by 3.6 percent last week. But demand in Europe weakened sharply
in January, down by 1.55 million barrels per day (bpd) from a
year earlier, Barclays Capital said citing data published by
the Joint Oil Data Initiative (JODI).
That was the largest monthly drop for European oil demand
ever, according to Barclays.
"European oil demand has become significantly worse in
recent months, and is now far worse than it was at the height
of the financial crisis," Barclays analysts led by Paul
Horsnell said in the bank's weekly oil data review.
Fitch rating agency's downgrade of Portugal added to
worries about debt levels and growth in the euro zone's smaller
countries.
European Union leaders hold what is likely to be a tense
and difficult summit on Thursday, divided over how to help
heavily indebted Greece and struggling to maintain confidence
in the euro. []
Economic data in the euro zone painted a mixed picture,
with manufacturing activity growing in March at its highest
level since the end of 2006 , but industrial orders in January
fell, underscoring the fragility of the economic recovery.
[] []
Faster-than-expected growth of Chinese oil demand may
compensate for Europe's weakness, Barclays said, citing JODI
figures showing consumption by the world's second-largest oil
user increased 2.1 million bpd in January from a year earlier.
(Editing by Ed Lane, Himani Sarkar)
