Oil prices fall as China, Greece worries outweigh expected U.S. stock draw

SINGAPORE (Reuters) - Oil futures fell again on Wednesday as worries over the Greek debt crisis and China's stock market turmoil outweighed an expected U.S. inventory drop.

A Reuters poll flagged a 700,000-barrel decline in U.S. oil inventory, while the American Petroleum Institute (API) estimated an almost 960,000-barrel drop. Government data will be published on Wednesday. [EIA/S][API/S]

Despite this expected draw, front-month U.S. crude futures were down 16 cents at $52.17 per barrel at 0147 GMT. That followed an 8-percent fall between Monday and Tuesday which pulled the contract to levels last seen in April.

Brent crude was 15 cents lower at $56.70 a barrel, following an almost 6-percent drop between Monday and Tuesday.

"Volatility in crude oil prices has increased dramatically in July, up by 40 percent in the last six trading days. Funds are contributing to the sell-off, with (U.S.) speculators reducing net-long position in WTI oil by 8 percent in the latest week," ANZ said.

China's intensifying stock market turmoil and Greece's debt crisis have dragged heavily on commodities this week.

China's stock markets tanked again on Wednesday even as authorities took new supportive measures, pulling down the CSI300 index <.CSI300> by a third since June and triggering a curb in numerous initial public offerings (IPOs) and trading suspensions.

HSBC on Wednesday cut its 2015 growth outlook for Asia excluding Japan from 6.3 percent from 6.5 percent.

"Things aren't exactly going according to plan. The sharp drop in crude prices, policy easing and stabilizing demand ... were supposed to give Asia a little breather over the last couple of quarters. Instead, local demand - whether construction in China, auto sales in Indonesia or real estate transactions in Taiwan - continues to slow," the bank said.

"Asia's export malaise is not just a temporary blip, but reflects longer-lasting structural factors, with a trade rebound unlikely."

Overall consumer demand in China could stall if the stock market crisis continues, hitting commodity consumption.

"The stock market crash doesn't bode well for the (Chinese) economy. If your stock market account is shredded, you won't buy your white goods," said Ed Meir at INTL FCStone.

In Europe, creditors have given Greece until the end of the week to come up with a proposal for reforms in return for loans that will keep the country from crashing out of Europe's currency bloc and into economic ruin.

(Additional reporting by Josephine Mason in New York; Editing by Joseph Radford)