Oil drops before US energy report

LONDON (AFP) - World oil prices fell Wednesday, dropping under 80 dollars in New York, as traders awaited the traditional weekly snapshot of energy inventories in the United States, analysts said.
New Yorks main futures contract, light sweet crude for delivery in February, fell 90 cents to $79.89 per barrel.
Brent North Sea crude for February was down 83 cents at 78.47 dollars in late morning London trading.
Prices had slumped Tuesday on prospects of easing heating fuel demand in the United States due to milder weather and new moves by China to cool off its economy.
Oil fell for the second consecutive day (on Tuesday) and is now trading below the 80-dollar level, said ODL Markets analyst Marius Paun.
Analysts are expecting milder weather than previously anticipated, thus denting consumption, but it was moves by the Chinese government to ease their own expansion that sent jitters through the oil markets. Following the impressive trade data on Monday, the Peoples Bank of China lifted their interbank rate for the second time in a week, Paun added.
The news stoked the oil markets because China is the worlds second biggest crude consumer after the US.
Later Wednesday, at 1530 GMT, the US Dept of Energy (DoE) will publish its report on American oil stockpiles for the week ending January 8.
Distillates including heating fuel and diesel are expected to drop due to recent freezing weather in the United States, which is the worlds biggest energy consuming nation.
Market expectations are also for a one-million-barrel increase in crude reserves and a similar gain in gasoline or petrol inventories, according to analysts polled by Dow Jones Newswires. Signs of weaker energy demand emerged Tuesday after the American Petroleum Institute (API) reported that US crude stocks rose 1.206 million barrels in the past week.
Gasoline reserves increased by more than 6m barrels, it said, with distillate stocks including heating oil up 3.6m barrels.
Oil futures came off in choppy trading on Tuesday ahead of the weekly US fuel inventories report expected later today, said VTB Capital commodities analyst Andrey Kryuchenkov. Just like in the week before, the cold snap should take its toll on distillate inventories with a potentially hefty draw, he added.