RTRS:UPDATE 4-Brent falls below $111 as U.S. Fed flags concern
* Fed worries about side effects of stimulus package
* U.S. crude stockpiles fell 12 mln bbls last week -API
* Coming up: U.S. Dec non-farm payrolls at 1330 GMT
* U.S. EIA weekly oil stocks data at 1530 GMT (Adds quote, updates prices)
By Peg Mackey
LONDON, Jan 4 (Reuters) - Oil fell below $111 a barrel on Friday after U.S. Federal Reserve officials indicated they may at least slow a stimulus programme this year, threatening the economic recovery in the world's biggest fuel consumer.
Signs of hesitation within the Fed about more increases to the central bank's $2.9 trillion balance sheet boosted the dollar and weighed down the price of oil.
Brent crude was trading down $1.43 to $110.71 by 1129 GMT, up from a session low of $110.38. U.S. crude was down $1.12 at $91.80.
"A much firmer U.S. dollar and speculation about an earlier end to Fed bond purchasing are putting oil prices under pressure," said a Commerzbank research note.
While the Fed said it would keep buying bonds to boost the economy over the coming months, minutes of a December meeting showed some officials are growing concerned about the programme's potential risk to financial markets.
Several thought it would be appropriate to slow or stop asset purchases well before the end of 2013.
DATA EYED
Oil could yet get a boost later on Friday if jobs and oil data from the United States affirm that the world's largest economy is on track for a recovery.
Thursday's figures from the American Petroleum Institute showed a steeper-than-expected drop of 12 million barrels in crude inventories in the week to Dec. 28. Analysts were expecting a 900,000 barrel draw. Data from the U.S. Energy Information Administration is due later on Friday.
The U.S. government will release non-farm payroll data, a key economic indicator that could offer further evidence of underlying strength in the economy as 2012 ended. The latest jobs data showed private-sector employers shrugged off the looming budget crisis and stepped up hiring in December.
"If the positive news continues, there is likely to be a piling on of traders, as the story for 2013 becomes an even more compelling one," Jason Schenker, president of Texas-based Prestige Economics, said in a note. (Additional reporting by Florence Tan in Singapore; editing by Jason Neely and Keiron Henderson)
