UPDATE 7-U.S. oil slips as dollar stronger, Fed stays put

Tue Dec 14, 2010 10:30pm GMT

 * Federal Reserve reaffirms bond-buying policy
 * MasterCard says U.S. gasoline demand down, weighs on oil
 * Coming up: EIA oil data, 10:30 a.m. EST Wednesday
 (Recasts, updates with analyst reaction following FOMC,
trading volume, API oil data)
 By Robert Gibbons
 NEW YORK, Dec 14 (Reuters) - U.S. crude oil prices slipped
on Tuesday after seesawing with the dollar and remaining
pressured after the Federal Reserve said economic recovery was
still too slow and reaffirmed its commitment to its bond-buying
plan to stimulate the economy.
 Crude oil prices seesawed as expectations that weekly oil
inventory reports would show gasoline stockpiles rose last week
and a separate report of weak fuel demand pressured U.S.
gasoline futures RBc1.
 But with cold weather in the United States and Europe
boosting heating fuel demand, U.S. heating oil futures rose and
helped limit crude oil's losses.
 U.S. crude for January delivery CLc1 fell 33 cents to
settle at $88.28 a barrel, having seesawed between $87.74 and
$88.95. Prices reached a 26-month high of $90.76 on Dec. 7.
 "The Fed's announcement ... had been pretty much priced
into the market. The oil market is looking for a reason to move
higher, after having fallen from the high above $90 last week,"
said Addison Armstrong, analyst at Tradition Energy in
Stamford, Connecticut.
 January crude oil options on the New York Mercantile
Exchange expire on Wednesday, ahead of the January futures
contract's expiration on Dec. 20.
 Total U.S. crude trading volume was at 553,856 lots after
post-settlement trading, according to Reuters data. That was
below the previous session's 589,228 lots traded and about 17
percent below the 30-day average of 667,478 lots.
 ICE Brent crude for January LCOc1 managed a 2 cent gain
to settle at $91.21 a barrel, trading from $90.68 and $91.73.
 The January Brent contract expires on Thursday.
 Brent prices were supported by news that daily crude oil
output from nine of the main North Sea streams is expected to
fall by more than 5 percent in January. [ID:nLDE6BD22K]
 The U.S. dollar rose slightly against the euro and yen and
the dollar index .DXY was up after the Federal Reserve
announced after its policy meeting that the economic recovery
was still too slow to bring down unemployment, and reaffirmed
its commitment to purchase $600 billion in bonds to stimulate
the economy. [ID:nN14232588]
 A stronger dollar can pressure dollar-denominated oil
prices by lifting the value of greenbacks paid to producers,
attracting investment to foreign exchange from commodities
markets and lifting prices to consumers using other
currencies.
 Strong Chinese implied oil demand for November
[ID:nTOE6BC02N] has lifted demand expectations even as
investors remain cautious after China did not raise interest
rates despite data at the weekend pegging November inflation at
a 28-month high.
 The positive sentiment in financial markets will not,
however, be enough to sustain an oil price above $90 unless
supported by strong fundamentals while downside financial risk
from the European debt crisis remains, analysts warned.
 Adding to concerns about U.S. oil demand, U.S. retail
gasoline demand fell 2.7 percent last week as prices rose to
their highest level this year, a report from MasterCard
Advisors said on Tuesday.
 Demand was also 1.3 percent lower than the year-ago period,
the report said. [ID:nNLLENE6PQ]  
 EYEING U.S. OIL INVENTORIES
 The industry group American Petroleum Institute's oil
inventory report released late on Tuesday showed crude stocks
fell 1.4 million barrels in the week to Dec. 10, less than
forecast. [API/S]
 Gasoline stocks rose 2.4 million barrels and distillate
stocks rose 2.0 million barrels, the API report said.
 Crude futures prices extended losses slightly in
post-settlement trading after the API report.
 U.S. crude oil inventories were expected to have declined
2.5 million barrels last week, according to a Reuters expanded
survey of analysts released ahead of the API report. [EIA/S]
 Gasoline stockpiles were expected to be up 1.7 million
barrels. The API report showed gasoline stocks rose 1.2 million
barrels in the U.S. Northeast region alone and the supply rise
was expected to ease recent supply tightness in the New York
Harbor hub, delivery point for the U.S. gasoline contract.
 Distillate inventories were forecast to be down 500,000
barrels as investors eye the impact on stockpiles as cold
weather in the U.S. Midwest and Northeast and northern Europe
boosted heating fuel demand. [ID:nDTN695] [ID:nDTN644]
 (Additional reporting by Gene Ramos in New York, Una Galani in
London and Rebekah Kebede in Perth)