* China yuan flexibility, rise vs dollar, may lift demand
* Euro slips, Wall St. pares gain, curbs oil's rise
* Coming up: Federal Reserve 2-day meeting starts Tuesday (Recasts, updates market activity, adds settlement prices)
By Robert Gibbons
NEW YORK, June 21 (Reuters) - Crude oil prices rose on Monday after China's move to make its currency more flexible raised expectations for boosted oil demand.
But U.S. crude futures ended well below an early 6-1/2 week high when technical resistance firmed near $79 a barrel.
A pullback by the euro and a slide by natural gas futures also helped curb oil's early rise, sources said.
U.S. July crude <CLc1> rose 64 cents, or 0.83 percent, to settle at $77.82 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 79 cents from $1.08 on Friday.
August ICE Brent <LCOc1> rose 60 cents to settle at $78.82 a barrel, after reaching an early $79.86 peak. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Take a Look - China vows yuan flexibility [
]Factbox on key China commodity imports [
]John Kemp column on yuan pledge: [
]Graphic on China's commidty spending:
http://link.reuters.com/zeh33m ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
"Crude stopped right at the July contract's 50-day moving average, $78.91, and there was a sense of why not book some profit and wait for the results of the Fed's two-day meeting," said Richard Ilczyszyn, senior market strategist at Lind-Waldock in Chicago.
The U.S. Federal Reserve Federal Open Market Committee two-day meeting starts on Tuesday. Markets will be looking for indications that low interest rates and other economic stimulus measures will remain in place.
U.S. July natural gas futures <NGN0> fell 12.4 cents, or 2.48 percent, to settle at $4.873 per million British thermal units, after being up more than 3 percent early.
"Crude prices (fell) here briefly with the fall in natgas prices being part of the reason," said Phil Flynn, analyst at PFGBest Research in Chicago.
Sources said weather models showing milder temperature forecasts in the medium term prompted natural gas traders to book profits after natural gas' recent rise.
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.
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. [
]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 percent from year ago. [
]U.S. crude prices have recovered about 21 percent from the May 20 $64.24 intraday low, but remain more than $9 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 U.S. crude stretched its gain after opening above the 50-day moving average for front-month crude and found resistance at the 100-day moving average.
U.S. stocks ended lower after initially rallying on the China currency news. [
] European stock markets < > rose, mirroring Asian equity gains after China's currency move boosted confidence in the global economy. [ ]The dispute over Iran's nuclear program was seen as supportive to oil prices. Iran barred two U.N. nuclear inspectors, adding to tension after Tehran was recently hit by new sanctions over its nuclear program. [
] (Additional reporting by Gene Ramos in New York, Joe Brock and David Turner in London and Alejandro Barbajosa in Singapore; Editing by Lisa Shumaker)