* Hurricane Center lowers probability of storm formation
* Coming Up: US existing home sales for June; 1400 GMT
* For a technical view, click: []
(Updates prices, adds details, previous dateline SINGAPORE)
By David Sheppard
LONDON, July 22 (Reuters) - Oil reversed early losses on
Thursday to head back towards $77 a barrel as signs of a
stronger recovery in Germany soothed investor concerns, but
rising U.S. inventories kept prices in check.
On Wednesday, U.S. Federal Reserve Chairman Ben Bernanke
rekindled unease by describing the prospects for the U.S.
economy as "unusually uncertain" in testimony to lawmakers, but
a jump in new manufacturing orders and services activity in
Germany reassured markets. []
"I think that this is a very good sign that we are not
heading for a double-dip recession," Dekabank analyst Sebastian
Wanke told Reuters Insider.
A flash estimate of the Markit purchasing managers' index
(PMI) for the manufacturing sector in Europe's largest economy
jumped to a three-month high of 61.2, up from 58.4 in June,
according to the survey published on Thursday.
U.S. crude for September <CLc1> declined as much as 40 cents
to $76.16 in Asian trade before reversing to climb 31 cents on
the day to $76.33 by 0915 GMT, while ICE Brent <LCOc1> rose 17
cents to $75.54.
European shares were up on Thursday ahead of the results of
the bank stress test result on Friday. They are expected to show
generally positive results for Greece, Italy and Ireland and a
few failures in Portugal and Spain. []
"The crude oil market is waiting to go higher to $80, $85
and $90, but it still needs time," said Ken Hasegawa, a
commodity derivatives manager at brokerage Newedge in Japan.
"Everyone understands that the (U.S.) inventory level is
relatively high. That is one of the bearish factors that may be
capping it down."
INVENTORIES RISE
U.S. crude stockpiles rose 360,000 barrels in the week to
July 16, government statistics from the Energy Information
Administration showed on Wednesday, against a forecast for a
drop of 1.4 million barrels. []
Rising crude imports helped offset an increase in refinery
capacity utilization. Higher refinery use boosted gasoline
inventories 1.1 million barrels, more than a forecast gain of
900,000 barrels.
Distillate stocks jumped up 3.9 million barrels, more than
double the expected rise.
Shell Oil Co <RDSa.L> began pulling nonessential workers
from eastern Gulf of Mexico oil and natural gas operations on
Wednesday due to the threat of a possible tropical storm that
may emerge by the weekend, the company said. []
But an updated forecast that cut the chances of a storm
developing also dampened crude prices.
The U.S. National Hurricane Center said on Thursday a
weather system hovering over the Bahamas, eastern Cuba and
Hispaniola had a 40 percent chance of becoming a tropical
cyclone in the next two days, down from as high as 70 percent on
Wednesday. []
Storms in the region can follow a westward path towards the
oil-rich Gulf of Mexico.
"It is possible that some supply disruption due to a
hurricane would be a supportive factor," Hasegawa said.
(Additional reporting by Alejandro Barbajosa in Singapore;
editing by Alison Birrane)
