* U.S. crude, distillates stocks rise - EIA
* Weather conditions seen milder this week
* Chinese monetary tightening a worry
(Updates prices, adds detail, changes dateline from LONDON)
NEW YORK, Jan 13 (Reuters) - Oil prices dropped below $80 a
barrel on Wednesday to the lowest this year, pressured by a
U.S. inventory report showing rises in crude and distillate
fuel stocks despite severe winter weather.
Crude stocks, expected to rise 1.2 million barrels,
increased by 3.7 million, the Energy Information Administration
said. Inventories of distillates, forecast to fall, rose by 1.4
million barrels. []
"It's a bearish report that points back to weak underlying
fundamentals in the domestic petroleum market," said Gene
McGillian, analyst at Tradition Energy in Stamford,
Connecticut. "Distillate stocks are up despite the cold weather
last week, which means there was no demand for anything except
the heating oil."
U.S. crude for February delivery <CLc1> was down 89 cents
at $79.90 a barrel by 12:20 p.m. EST (1720 GMT). It earlier
fell to $78.37, the lowest since Dec. 29, but then rebounded
with the rest of the oil complex.
In London, Brent crude for February <LCOc1> delivery, which
expires on Thursday, fell 92 cents to $78.38 a barrel.
The price of U.S. crude has fallen more than $4 from a
15-month high of $83.95 reached on Monday and some analysts
believe it could have farther to fall.
"It is becoming increasingly apparent that the upside
breakout above key $82 resistance seen last week never got
going and seems to have been no more than a short-lived burst
higher," Edward Meir of MF Global said in a report.
Oil inventories have bulged in the United States over the
past 18 months as the economic crisis has cut energy demand.
Very cold weather over the past two weeks was expected to have
helped to erode stocks.
Warmer weather across the central and eastern United States
is expected to arrive in the next few days, DTN Meteorlogix
said, reducing heating demand. []
The EIA report followed figures from the American Petroleum
Institute, an industry group, which said on Tuesday that
distillate stocks rose by 3.6 million barrels.
Investors have looked to wider economic data in recent
months for signs of economic recovery and a potential rebound
in energy demand. On Wednesday, U.S. stocks rose, lifted by a
broker's upgrade of Merck & Co and a higher profit outlook from
Kraft Foods Inc. []
Oil was pressured on Tuesday by China's move to raise
banks' cash reserve requirements, the latest step towards
tightening monetary policy, which some traders see potentially
dampening energy demand.
China is the world's second-largest oil consumer after the
United States.
(Additional reporting by Joshua Schneyer in New York, David
Sheppard and Alex Lawler in London, Alejandro Barbajosa in
Singapore; Editing by Walter Bagley)
