* European equities turn lower
* U.S. crude stocks expected to rise by 2.1 million barrels
* Flow through Kirkuk-Ceyhan pipeline resumes
* Stronger U.S. dollar pressures prices
(Updates prices, adds comment)
By David Sheppard
LONDON, April 7 (Reuters) - Oil fell towards $50 a barrel on
Tuesday, paring early gains after European equities turned
lower, as investors continued to track share movements to try
and gauge the strength of the global economy.
U.S. light crude for May delivery <CLc1> was down 86 cents at
$50.19 a barrel by 1125 GMT, having settled $1.46 lower on
Monday as Wall Street tumbled.
London Brent crude <LCOc1> fell 44 cents to $51.80.
Crude oil prices have been closely tracking the fortunes of
broader markets as investors look for clues as to when oil
demand might rebound.
"Everybody realises that demand is very bad. Inventories are
really high and fundamentals are not very good," said Tony
Nunan, risk manager at Mitsubishi Corp.
"Demand goes hand in hand with the economy these days, so
people are trading on the back of the global economy."
European shares opened higher but quickly turned lower on
Tuesday, falling for the third consecutive session as figures
showed the eurozone shrank by more than previously thought in
the fourth quarter. []
The global recession has cut oil demand around the world,
with consumption expected to be curbed for the first time since
the early 1980s.
The resumption of oil flow through the Kirkuk-Ceyhan oil
pipeline also pressured prices.
Oil flow through the pipeline, which carries more than a
fifth of Iraqi crude to the Turkish Mediterranean coast had
resumed on Monday, a source at the Turkish pipeline operator
told Reuters.
Strength in the dollar also weighed, as commodities prices
in the U.S. currency become more expensive for overseas
investors.
U.S. INVENTORIES
Little upside is expected from weekly U.S. inventories data
due on Tuesday and Wednesday, with oil analysts predicting yet
another increase in crude stocks because of high import levels
and weak demand from domestic refiners. []
A preliminary forecast of seven analysts called for a 2.1
million barrel rise in crude stocks, which are already running at
a 16-year high, according to the U.S. Energy Information
Administration (EIA).
"Investors are eyeing a potential build in U.S. crude
stocks, which should keep prices under pressure," said Andrey
Kryuchenkov, vice president commodities at VTB Capital in
London.
"After prices rose over the past couple of weeks the demand
situation is again encouraging a little profit-taking."
Gasoline stocks could fall by 1 million barrels, and
distillates by 0.4 million barrels, mainly due to lower refinery
production. Demand may have dipped too, analysts added.
The American Petroleum Institute will release its report on
Tuesday at 2030 GMT, while the EIA -- whose data is generally
seen as more comprehensive -- releases its report at 1530 GMT on
Wednesday.
Oil prices have gained roughly 40 percent since mid-February
as equities markets rose and OPEC producers cut output, though
oil's gains have been limited by continued weak global demand and
rising inventory levels.
(Additional reporting by Maryelle Demongeot in Singapore;
editing by James Jukwey)
