* Fundamental outlook still bearish, analysts say
* Technicals suggest rebound to $74.40 []
* Coming Up: U.S. Initial jobless claims; 1230 GMT
(Updates detail, comment, prices)
By Christopher Johnson
LONDON, Aug 26 (Reuters) - Oil rose for a second day on
Thursday as investors bought back into the market after it hit
11-week lows, but analysts said the fundamental outlook was
still bearish with ample stocks to cover any rebound in demand.
The rally was supported by a 0.5 percent fall in the value
of the dollar <.DXY> against a basket of currencies and some
technical signs that the market was oversold. A weaker dollar
often supports commodities because many of them are priced in
the U.S. currency.
Equity markets were also stronger in Europe [] and Asia
[] [] on Thursday.
But the supply and demand picture for oil remained negative
and the wider economic picture was also gloomy, analysts said.
U.S. crude for October delivery <CLc1> was up 50 cents at
$73.02 per barrel by 0848 GMT, having risen more than 1 percent
on Wednesday after touching $70.76, its lowest since early June.
Oil has dropped about $10 from a peak of almost $83 on Aug 4.
ICE Brent <LCOc1> climbed 60 cents to $74.08.
Front-month U.S. crude futures' 14-day relative strength
index (RSI) fell to just 30 on Tuesday, a technical pointer to
oversold conditions, but has since bounced to around 38, Reuters
data show, on profit-taking from short positions.
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For a graphic of the 14-day RSI for U.S. crude, click:
http://graphics.thomsonreuters.com/gfx1/ABE_20102608123008.jpg
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"The move higher was likely attributable to a short-covering
rally from very oversold conditions," said Edward Meir, senior
commodity analyst at brokers MF Global.
Brokers at PVM agreed in their daily note to clients:
"This has all the hallmarks of an upside correction or
retracement in an otherwise falling market," they said.
Financial markets will focus on U.S. jobless claims due out
later on Thursday and U.S. second-quarter gross domestic product
due for release on Friday.
"Thursday's trading should be dominated by macro releases
out of the United States, with weekly initial claims readings
figuring most prominently," Meir said. "We suspect that an
in-line or a better-than-expected figure will likely help
Wednesday's modest short-covering rally gain further traction."
New U.S. home sales slumped to their slowest pace on record
in July and orders for costly durable goods were weak, data
showed on Wednesday, heightening fears the economy was at risk
of another downturn. []
A slowdown in the manufacturing sector as indicated by the
weak U.S. durable goods orders report "does not offer much hope
for a bounce in diesel demand heading into September," Harry
Tchilinguirian, a commodity strategist at BNP Paribas, said in a
weekly note.
"Similarly, labour markets offer scant support to gasoline
demand, and with the end of the driving season around the
corner, seasonal support will begin to fade," he added.
A negative underlying mood also prevailed in the oil market
after government statistics showed total U.S. oil stocks rose to
a fresh all-time high last week, with gains across the board.
The U.S. Energy Information Administration said on Wednesday
U.S. crude inventories rose by a bigger-than-expected 4.11
million barrels last week. []
Gasoline inventories were 2.27 million barrels higher, while
distillate stocks, which include heating oil and diesel,
increased by a larger-than-expected 1.76 million barrels.
In aggregate, commercial crude and product stocks rose to
1.139 billion barrels last week, topping the record weekly high
of 1.13 billion barrels set in the week to Aug. 13.
Also sending bearish signals, forecasters revised downwards
their expectations of the oil price both for this year and next,
a Reuters poll showed on Wednesday. []
(Additional reporting by Alejandro Barbajosa in Singapore;
editing by William Hardy)
