* Stock markets rise after reassurance U.S. Fed could act
* Fibonacci shows correction to $74.21 []
* Hedge funds make big increase in net short positions
(Updates throughout, previous Singapore)
By Barbara Lewis
LONDON, Aug 30 (Reuters) - Oil dipped below $75 on Monday,
chipping away at three days of gains as the bullish impact of a
speech from Federal Reserve Chairman Ben Bernanke began to drain
away.
Positive stock markets and increased hurricane activity in
the Atlantic Ocean provided modest support, although none of the
storms were for now on track to hit oil and gas infrastructure
in the U.S. Gulf of Mexico.
Analysts focused on the record levels of U.S. oil
inventories [] and said the decision of Barclays Capital,
typically one of the most bullish of banks, to cut its oil price
forecasts last week, was a very bearish signal. []
U.S. crude for October <CLc1> shed 36 cents to $74.81 a
barrel by 0932 GMT. Earlier in the session, it had approached
Friday's peak of $75.59, the strongest intraday price since Aug.
19.
ICE Brent for October <LCOc1> fell 59 cents to $76.06.
Data issued late last week showed a big drop in speculative
length -- or bets the market would go higher. []
Olivier Jakob of Petromatrix consultancy noted it was the
first time so many hedge funds had been short U.S. light crude
since August 2008 -- when oil prices had begun their crash from
a record high of nearly $150 hit in July 2008 to just above $30
a barrel in December of that year.
"The very strong shift in position of the large speculators
over the last two weeks shows they don't have a lot of
confidence," Jakob said. "Levels of (oil) stocks are just too
high."
After falling to an intrady low of $70.76 last week for U.S.
crude, its lowest in nearly three months, oil rallied in the
second half of the week and on Friday drew strength from a
speech from Bernanke.
He downplayed expectations the world's biggest economy might
slip back into recession and said the Fed was ready to take
further steps if needed. []
EQUITIES UP, DOLLAR DOWN
Equities markets in Asia and Europe rallied in response
[], while the dollar eased [] and could fall further in
the event the Fed resorts to extra stimulus.
While a weak U.S. currency typically provides support for
oil and other commodities denominated in dollars, which become
cheaper for non-dollar investors, if weakness is a symptom of
economic failure in the world's biggest energy consumer, any
bullish impact could be undermined.
U.S. President Barack Obama said on Sunday the U.S. economy
was expanding, but not quickly enough. []
Markets will be nervously watching a batch of U.S. data this
week, culminating in non-farm payroll data on Friday, which is
expected to show 99,000 jobs were lost in August, with
potentially bearish implications for oil demand. []
Oil is also monitoring hurricane activity.
Earl was expected to sweep past the Virgin Islands and
Puerto Rico as a major hurricane on Monday, before turning
towards the northwest to weaken and approach the mid-Atlantic
U.S. coast, the National Hurricane Centre (NHC) said.
[]
On its heels, an area of low pressure in the central
Atlantic Ocean had an 80 percent chance of becoming a tropical
cyclone in the next 48 hours, according to the NHC.
It was still too early to determine whether this system
would take a similar track to hurricane Earl, which is forecast
to stay well away from the oil-rich Gulf of Mexico.
Any disruption to oil caused by a hurricane could help to
undo the unusual strength of Brent compared with U.S. futures,
which have been weighed down by the huge levels of U.S.
inventories.
The discount of U.S. crude to European Brent narrowed to
around $1.30 a barrel on Monday.
(Additional reporting by Alejandro Barbajosa in Singapore)
