(Corrects to Tuesday in paragraph 10)
* U.S. consumer confidence dips in July
* Investors await Fed statement, key economic data this week
* Export curbs limit oil price losses
* Coming up: API weekly inventory data at 4:30 pm EDT
By Anna Louie Sussman and Jonathan Leff
NEW YORK, July 30 Oil slipped on Tuesday and the
spread between WTI crude and Brent widened as traders bet that
the fund-fuelled rapid run-up in U.S. prices had gone too far,
while some held tight ahead of a Federal Reserve meeting.
The fall of oil futures on Tuesday follows a rally in both
benchmarks to multi-month highs above $109 in mid-July, which
attracted bullish speculators and large hedge funds into the
market. U.S. crude in particular had rallied to a 16-month high
as infrastructure developments allowed oil in landlocked
Cushing, Oklahoma, to flow to the U.S. coasts.
That trade has begun to unwind, with a growing consensus
that expectations of tight Midwest supplies were overdone. News
on Tuesday that BP would start up several more units at its
revamped Whiting, Indiana, refinery also spurred selling, with
speculation it may reduce demand for sweeter crude.
"It's a continuation of the bearish momentum since we peaked
about two weeks ago," said Stephen Schork, the editor of The
Brent futures slid 68 cents to $106.77 a barrel by
1:56 p.m. EDT (1756 GMT), but was still on track for a monthly
gain of nearly 5 percent, the biggest monthly rise in 11 months.
U.S. crude fell $1.70 to $102.85.
The North Sea benchmark's premium over its U.S. counterpart
widened to $3.92. The gradual widening over the past five
sessions follows a five-month narrowing that brought the two
benchmarks to parity on July 19.
The liquidation carries with it "the potential that the
decline in WTI pulls the rest of the petroleum complex down on
top of it," Tim Evans, an energy specialist at Citi Futures
Perspective, wrote in a research note.
Market players are holding out for clues from the Fed's
two-day meeting on the fate of the U.S. stimulus program that
has spurred demand in the world's top oil consumer. The Fed is
due to issue a statement on Wednesday.
U.S. inventory data due from the industry's American
Petroleum Institute later on Tuesday will also offer an insight.
U.S. commercial crude oil stockpiles likely fell by 2.3 million
barrels last week for the fifth straight week, a Reuters poll of
six analysts showed on Monday.
BP Plc outlined the rest of the modernization project
at the 413,000 barrel per day (bpd) Whiting refinery, saying it
expects a sulfur recovery unit and a hydrotreater to come on
line in the third quarter.
As crude prices climbed throughout July, hedge funds and
other large speculators piled in to the market.
"The market was really unnerved by the report Friday showing
massive length," Andy Lebow, vice president at Jefferies Bache
"Right now the market is just liquidating. Brent is
suffering from the same problem: tremendous growth in
speculative length in the last few weeks. As the market moves
lower, there's going to be more pressure on it as well."
Investors also fretted that the manufacturing surveys later
this week might highlight weakness in China.
"The market is keeping an eye out for some catalyst to
restart the rally, but as of now we really don't have it," said
Gene McGillian, an analyst with Tradition Energy in Stamford,
Activity in China's manufacturing sector may have contracted
in July for the first time in 10 months, a Reuters poll showed,
signaling a protracted slowdown in the world's second-largest
economy as demand at home and abroad sags.
"Chinese data along with actions by the government are
clearly pointing to a slowing of the main economic and oil
demand growth engine of the world," said Dominick Chirichella of
Energy Management Institute.
U.S. consumer confidence pulled back in July as consumers
were less optimistic about the outlook for the economy and labor
market, according to a private sector report.
(Additional reporting by Peg Mackey in London and Jessica
Jaganathan in Singapore; Editng by Maureen Bavdek and Andrew