* Oil up more than $1, rebounds from 5-month low
* Euro crisis, high U.S. stockpiles continue to weigh
* Coming up: US API crude, distillate, gasoline stocks
(Updates prices, adds comment, adds graph)
By Chris Baldwin
LONDON, May 18 (Reuters) - Oil struggled to rise more than a
dollar to above $71 a barrel on Tuesday, recovering from a
five-month low the previous session, but high inventory levels
and the strength of the dollar were expected to limit gains.
U.S. crude for June delivery <CLc1> rose $1.58 to $71.66 at
1009 GMT, after settling down $1.53 at a five-month low of
$70.08 a day earlier.
London Brent crude <LCOc1> for July rose $1.29 to $76.39 a
barrel.
The trends remain uncertain because of persistent investor
concerns over the euro and swollen U.S. oil inventories, with
the euro again buffeted in volatile trade near a four-year low
touched on Monday. []
June crude has fallen 20.5 percent from its 19-month high
$87.15 hit on May 3, which could indicate that crude prices may
be in for a short-term bounce, technical analysts said.
"Crude oil has made a big, big correction and there will be
some attempts at finding a bottom around $70," said independent
oil analyst Olivier Jakob at Petromatrix.
"We are getting closer to the fair value for crude oil, but
the problem remains the high contango level."
U.S. crude futures for July <CLc2> are around $3 more per
barrel than June front-month futures, with the June contract set
to expire on Thursday.
CUSHING STOCKPILES
Crude stockpiles at the delivery hub for the U.S. contract's
West Texas Intermediate benchmark crude have risen in the last
eight weeks to a record 37 million barrels, pushing front-month
U.S. crude down relative to later futures contracts <CL-1=R> and
Brent.
"When stocks come close to capacity, traders try to get rid
of front month contracts because of difficulties taking delivery
of oil when no storage is available," said Global Oil Analyst
Christophe Barret at Credit Agricole CIB in London.
U.S. crude stockpiles likely rose last week as imports
rebounded and refinery utilisation held flat, a preliminary
Reuters poll of analysts showed on Monday. Storage capacity at
the Cushing, Oklahoma hub is thought to be around 41 million
barrels. []
Ahead of weekly inventory data from industry group American
Petroleum Institute (API) on Tuesday and the U.S. government
Energy Information Administration (EIA) on Wednesday, crude
inventories rose 700,000 barrels on average last week.
EURO/DOLLAR CORRELATION
The euro stayed on the back foot on Tuesday, slipping versus
the dollar near a four-year low as a meaty combo of euro zone
debt crisis and growth-crimping austerity steps set investors to
worrying that regional growth could be hurt. []
But analysts said tightening European credit default swaps,
the market mechanism used to transfer credit exposure to fixed
income assets between parties, had helped to improve the
correlation between oil prices and the EUR/USD rate.
[]
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For a chart on crude, gold and euro/dollar levels, click:
http://graphics.thomsonreuters.com/gfx/JBO_20101805092644.jpg
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"When CDS spreads blew out in the Eurozone, bond markets
were rattled and concern grew on the EUR as a reserve currency -
at the time, the EUR/USD rate was a poor guide to the direction
of the oil price," said Harry Tchilinguirian, senior commodity
analyst at BNP-Paribas.
Euro zone finance ministers are ironing out a 750 billion
euro ($925 billion) plan hatched a week ago to calm markets and
stem fears of repeated Greek-style debt crises in the currency
area. []
"The European CDS spreads have come in a little with the
latest package, and the correlation of oil to EUR/USD has
improved," Tchilinguirian said.
(Additional reporting by Judy Hua in Singapore, editing by
Keiron Henderson)
