* U.S. oil product stocks jump more than expected
* IEA lifts demand forecast, but emphasizes economic risk
* Coming up: U.S. weekly jobless claims, Thursday
(Updates market activity and adds settlement prices)
NEW YORK, Aug 11 (Reuters) - Oil fell more than 3 percent
on Wednesday, its biggest drop in six weeks, as a rise in U.S.
gasoline stocks exacerbated a sell-off triggered by slower
Chinese output growth and a downbeat economic outlook from the
Federal Reserve.
Gasoline prices led the decline, dropping for the fifth
time in six days. In a sign of unusually weak summer demand,
gasoline's premium to crude narrowed to less than $6 a barrel
for the first time since December after weekly inventory data
showed stocks rising even as refiners slashed output.
The rise in U.S. refined product stocks overshadowed the
bigger-than -forecast 3 million barrel draw in crude stocks, as
well as a slight upgrade in the outlook for global oil demand
growth from the International Energy Agency.
U.S. crude for September <CLc1> delivery fell $2.23, or
2.78 percent, to settle at $78.02 a barrel. Total trading
volume came to more than 700,000 lots after the settlement,
well above the average of 555,000 lots over the past 30 days.
In post-settlement electronic trade, crude had fallen as
low as $77.42 by 4:30 p.m. (2030 GMT).
Front-month ICE Brent crude <LCOc1> fell $1.96 to settle at
$77.64.
September RBOB gasoline <RBc1> fell 8.77 cents, or 4.21
percent, to settle at $1.9976 a gallon, while September heating
oil <HOc1> fell 2.36 percent.
Prices traded in tandem with slumping U.S. equity markets
and a surging dollar through most of the day. Data showing
slower growth in Chinese investment and factory output
[] fed early losses that accelerated as traders
grew more anxious about the risk of a double-dip recession.
The U.S. S&P 500 stock index <.SPX> fell 2.6 percent and
the U.S. dollar index <.DXY> surged by nearly 1.8 percent as
the Chinese data plus Tuesday's Fed comments about a sluggish
recovery fueled worries about the economy and drove investors
to sell riskier assets. [] []
Oil prices took an additional hit from weekly government
oil stock data showing refined products inventories rose more
than expected in the week to Aug. 6 despite a sharp 3.1
percentage point drop in refinery utilization. []
"One thing to take from the report was the
larger-than-expected gain in products despite lower refinery
rates, which shows how poor demand is in the United States,"
said Mike Zarembski of OptionsExpress in Chicago.
Gasoline inventories rose 400,000 barrels, more than
expected during summer, when stocks normally decline, leaving
the premium to year-ago levels at 11.5 million barrels. The EIA
also reported a 3.5 million barrel rise in distillate stocks.
Most of the nationwide decline in crude oil stocks was
concentrated in the Midwest PADD 2 region. This includes
refiners that have been forced to curtail runs due to a more
than two-week closure of a small but key Enbridge pipeline.
Stocks fell by 2.4 million barrels from the previous week's
record high, although refinery crude runs dipped by less than
one percent, according to the data. []
Oil demand readings from China, the world's No. 2 consumer,
showed growth slowing to a modest 2.2 percent in July versus a
year ago, and down 6 percent from June. []
While the IEA monthly report slightly increased forecasts
for global crude demand for 2010 and 2011, it warned any rise
in fuel consumption could be wiped out if the global economy
proved weaker than expected, []
The market was unmoved by Tropical Depression Five in the
eastern Gulf of Mexico, which could dissipate as it moves
toward eastern Louisiana, the U.S. National Hurricane Center
said. []
There had been no reports of oil or natural gas output cuts
or platform evacuations due to the tropical depression,
government officials said. []
(Reporting by Robert Gibbons, Gene Ramos and Edward McAllister
in New York and David Turner in London and Florence Tan;
Editing by David Gregorio)
