* Stock markets edge higher
* Fibonacci shows correction to $74.21 []
* Hedge funds make big increase in net short positions
(Updates throughout)
By Barbara Lewis
LONDON, Aug 30 (Reuters) - Oil dipped below $75 on Monday
after the bullish impact of a speech from Federal Reserve
Chairman Ben Bernanke began to drain away and the focus switched
back to brimming fuel stocks.
Increased U.S. hurricane activity provided limited support,
but the storms were not on track to hit oil and gas
infrastructure in the U.S. Gulf of Mexico.
Analysts cited 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 55 cents to $74.62 a
barrel by 1358 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 24 cents to $76.41.
"The fundamental picture is still weak, with inventories
near record levels and lacklustre demand," said Gene McGillian,
an analyst with Tradition Energy in Stamford, Connecticut.
Data issued late last week showed a big drop in speculative
length -- or bets the oil market would go higher. []
Olivier Jakob of Petromatrix consultancy noted it was the
first time that so many hedge funds have been this 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 intraday 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
Bernanke's speech.
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 TENTATIVE
Equities markets in Asia rallied in response, while European
stock markets were tentative. MSCI's all-country world stock
index <.MIWD00000PUS> gained 0.25 percent.
The dollar was flat against a basket of currencies []
but might fall in the event the Fed resorts to extra stimulus.
A weak U.S. currency typically provides support for oil and
other commodities denominated in dollars, which become cheaper
for non-dollar investors, but if weakness is a symptom of
economic difficulty 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 data this
week, culminating in U.S. 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. []
The oil market was also monitoring activity as the U.S.
hurricane season continues.
Earl battered the Northern Leeward Islands in the Caribbean
on Monday and was poised to become a major Category 3 hurricane,
the U.S. National Hurricane Center said. []
It was, however, forecast to stay well away from the
oil-rich Gulf of Mexico.
Any hurricane disruption to oil 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 was around
$1.80 a barrel on Monday.
(Additional reporting by Robert Gibbons in New York and
Alejandro Barbajosa in Singapore, editing by Jane Baird)
