* U.S. crude touches year-high $79.05, eases
* Some analysts say 9 percent gains last week "overblown"
* Wall St earnings to test market's mettle
(Recasts, updates prices, market activity; new byline, changes
dateline from LONDON)
By Edward McAllister
NEW YORK, Oct 19 (Reuters) - Oil prices rose slightly
toward $79 a barrel in see-saw trade on Monday as the market
took a breather after seven straight sessions of gains.
U.S. crude for November delivery <CLc1> rose 27 cents to
$78.80 by 12:09 EDT (1609 GMT), after hitting a session high of
$79.05, the strongest since October last year. London Brent
crude <LCOc1> rose 6 cents to $77.05.
"After last week's incredible ride, the oil market is
uncertain about its direction," said Phil Flynn, analyst at
PFGBest Research in Chicago. "We have seen crude futures hit
somewhat overbought conditions and at this point, the market is
working off those conditions."
U.S. stocks rose on Monday, buoyed by investor optimism
over the strength of earnings season at the beginning of a busy
week for corporate results. []
The dollar hovered near a 14-month low against the euro as
investors bet the Federal Reserve will hold U.S. interest rates
near zero, which provided support for oil. [] A weak dollar
makes dollar-denominated commodities like oil cheaper for
holders of other currencies.
"The gains were overwhelmingly driven by financials and
market optimism rather than fundamentals," said analyst Richard
Gorry at JBC Energy in Vienna.
Crude prices have gained more than 10 percent in October,
spurred by a weak U.S. dollar and bullish sentiment across
financial markets, interpreted by some oil speculators as
outlying indicators for a potential return to demand growth.
"Oil market participants are betting that equity markets
only take a pause and that positive third-quarter results in
the U.S. corporate sector and better U.S. housing market data
continue to fuel economic optimism," said analyst Carsten
Fritsch at Commerzbank Commodity Research.
EYEING EQUITIES
MSCI's benchmark all-country world stock index was up
around half a percent early on Monday, recovering after
investors were disappointed by General Electric and Bank of
America on Friday. []
Thomson Reuters Proprietary Research shows that with around
a quarter of companies in the U.S. S&P 500 <.SPX> index having
reported, 79 percent have beaten analysts expectations. In a
typical quarter the percentage is 61 percent. []
But oil market participants remains mindful that fuel
demand is only expected to recover gradually, and that large
volumes of oil, to include refined products, are now in excess
following a contraction in energy use triggered by the
financial crisis.
"OPEC spare capacity has reached 6 million barrels per day,
refining margins are depressed, OECD demand remains lacklustre
and the world has yet to come to terms with the massive middle
distillate stock surplus. Oil looks a little overblown at $79,"
JBC's Gorry said.
At least some of the oil market's gains have come from
speculative flows, with money managers hiking net long crude
oil positions on the New York Mercantile Exchange in the week
to Oct. 13, the Commodity Futures Trading Commission said in a
report on Friday.
"As long as liquidity is so ample and interest rates are
low, a lot of investors will be coming into the market," said
Fritsch at Commerzbank.
(Additional reporting by Gene Ramos and Robert Gibbons in New
York, Christopher Baldwin in London, Fayen Wong in Perth;
Editing by David Gregorio)
