(Corrects to euro drop, not bounce, in first paragraph)
* Natgas retreat, euro slip vs dollar, pressures oil
* China yuan flexibility expected to boost oil demand
* Coming up: Federal Reserve 2-day meeting starts Tuesday
(Recasts, updates prices, market activity)
By Robert Gibbons
NEW YORK, June 21 (Reuters) - Crude oil prices pared gains
after jumping to a 6-1/2-week high on Monday, as a drop by the
euro against the dollar and a slide by natural gas futures
curbed oil's early rise after China's move to make its currency
more flexible raised expectations for more demand.
At 1:56 p.m. EDT (1756 GMT), U.S. July crude <CLc1> was
down 11 cents at $77.07 a barrel, after rising to $78.92,
highest intraday price since $80.39 was struck on May 6.
The July contract expires on Tuesday and its deficit to the
August contract <CL-1=R> narrowed on Monday, to around 86 cents
from $1.08 on Friday.
August ICE Brent <LCOc1> fell 22 cents to $78 a barrel,
retreating from its $79.86 peak.
U.S. July natural gas futures were down 12.7 cents at
$4.870 per million British thermal units, after being up more
than 2 percent.
"Crude prices (fell) here briefly with the fall in natgas
prices being part of the reason. Also, equities are slightly
lower at this point," said Phil Flynn, analyst at PFGBest
Research in Chicago.
Sources also said weather models showing milder temperature
forecasts in the medium term prompted natural gas traders to
book profits after natural gas' recent rise.
"Technically, the inability of front-month crude to move
above $79 appears to indicate that the news of China's
revaluation of its currency may not be as strong an impetus as
earlier thought. The dollar is also proving resilient and is
coming back up," Flynn added.
China's yuan on Monday posted its biggest daily surge since
its July 2005 landmark revaluation, sending a signal ahead of
this weekend's G20 summit that Beijing is keeping its word and
allowing greater currency flexibility. []
The yuan closed at 6.7976 versus the dollar, up 0.42
percent from Friday's close of 6.8262. The 6.7958 intraday peak
was an all-time high since the revaluation. []
The euro fell to session lows against the dollar on Monday
as stop loss orders were triggered once the euro dropped below
$1.2350, traders said. []
Analysts said a stronger yuan against the U.S. dollar might
make Chinese imports of dollar-denominated oil less expensive,
boosting demand consumption. []
But the longer-term impact on oil and other commodity
prices may be small, according to some analysts, since China
will not let the yuan rise sufficiently high to make much
difference to its companies' spending power on commodity
imports [].
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Take a Look - China vows yuan flexibility []
Factbox on key China commodity imports []
John Kemp column on yuan pledge: []
For a graphic on China:http://link.reuters.com/zeh33m
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Copper also pared its gains after it was up strongly in
response to the news about the yuan.
Reuters' analysis of official Chinese figures on Monday
showed China's oil demand fell in May from April, though it
remained up 9.4 per cent from year ago. [].
U.S. crude prices have recovered about 21 percent from the
May 20 $64.24 intraday low, but remain more than $8 below the
2010 peak of $87.15 struck on May 3.
The technical picture had taken on a renewed bullish tone
early on Monday, as NYMEX crude stretched its gain after
opening above the 50-day moving average and found resistance at
the 100-day moving average.
European and U.S. stock markets <> <.SPX> rose,
mirroring Asian equity gains after China's currency move
boosted confidence in the global economy. But U.S. stocks were
seen as overstretched technically. []
A focus this week for global markets is the U.S. Federal
Reserve Federal Open Market Committee two-day meeting starting
on Tuesday. Markets await confirmation that low interest rates
and other economic stimulus measures will remain in place.
Supportive to crude prices was the dispute over Iran's
nuclear program. Iran has barred two U.N. nuclear inspectors,
adding to tension after Tehran was recently hit by new
sanctions over its nuclear program. []
Also seen as supportive to energy prices, Russia cut gas
supplies to Belarus by 15 percent on Monday, pressing its
neighbor to pay a $192 million debt and raising fears of
disruptions in deliveries to Europe. []
(Additional reporting by Gene Ramos in New York, Joe Brock and
David Turner in London and Alejandro Barbajosa in Singapore;
Editing by Sofina Mirza-Reid)
