Oil fell for a second day on Wednesday as a spike in US Treasury yields boosted the dollar Oil fell for a second day on Wednesday as a spike in US Treasury yields boosted the dollar while a report showed a larger-than-expected increase in US gasoline stockpiles. US crude for January fell $53 cents to $88,16 by 1218 GMT, after touching $90,76 on Tuesday, the highest price since October 2008. ICE Brent fell 35 cents to $91,04. US Treasury prices fell and yields rose after President Barack Obama proposed extending tax cuts aimed at supporting economic growth, but also unleashing fears about the longer-term rise in the national debt level. Higher US economic growth would also be positive for oil prices. But oil continued to fall from its 26-month high reached this week as a stronger dollar would make its purchases more expensive in other currencies. "There’s a little less confidence about the outlook for the US economy, and the general view is that they can’t afford to extend the tax cuts. That is creating a bit of risk aversion in the market," said Sydney-based CMC Markets analyst David Taylor. "Although the sharp move higher in US yields is dampening some of the appeal of commodities... the broader bullish trends are undamaged, and rather than a significant pullback, this is likely to translate into a choppier rise," said Jordan Kotick, head of Global Technical Analysis at Barclays. Other investors said the downward trend could persist if China was to raise rates to cool down growth. "For the holiday period the main risk will come from China as the odds for an interest hike are increasing," said Olivier Jakob from Petromatrix. MARKETS TIGHTEN US crude oil inventories fell much more than expected last week but refined product stocks rose as refinery utilization rates surged, the American Petroleum Institute (API) said on Tuesday. Government data on stocks and demand is due on Wednesday from the Energy Information Administration (EIA) at 1530 GMT. "If the DOE (U.S. department of energy) report confirms the API, today will be another test of the bullish resilience," said Jakob. China, the world’s No.2 oil consumer after the United States, is due to publish November trade data on Friday. Record production cuts by the Organization of the Petroleum Exporting Countries at the end of 2008 kicked off a fall in US and global oil inventories that has helped support prices. OPEC next meets on Dec. 11 in Quito, Ecuador, where it is expected to leave output targets unchanged, as prices stay within its preferred price range of $70-$90. "OPEC is of the view to let it rise to about $90," Taylor said. "There are no fundamental reasons for it to go higher." Iran’s OPEC governor said the global oil markets were balanced and that oil consumption would rise by 1 million barrels per day next year The US government on Tuesday left its forecast for world oil demand growth in 2011 virtually unchanged at 1,43 million bpd for next year.

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