* Atlantic weather system may turn into cyclone -NHC
* China regulator warns on 'slow' global economic recovery
* Coming Up: U.S. API oil inventory report; 2030 GMT
* For a technical view, click: []
(Updates throughout with price rally)
By Barbara Lewis
LONDON, June 15 (Reuters) - Oil rose above $76 on Tuesday,
drawing support from forecasts of reduced crude stockpiles in
the United States, but wary following a Greek sovereign debt
downgrade that underlined the extent of the euro-zone crisis.
U.S. crude futures pared gains on Monday after credit
ratings agency Moody's cut Greek sovereign debt by four notches
to junk status. []
Spain also admitted the European financial crisis was
affecting the country's banks and foreign banks were refusing to
lend to some of them. []
While the oil market rallied on Tuesday, analysts said it
was struggling to shake off lingering nervousness across global
financial markets about investing in riskier assets.
"Basically, it's a tug of war between the credit
consideration, particularly the Greek downgrade and prospects of
European growth and the API (American Petroleum Institute)
data," said Paul Harris, analyst at Bank of Ireland. "Traders
are happy to play the range."
U.S. crude futures <CLc1> were 78 cents higher at $75.90 a
barrel by 1016 GMT, compared with a 19-month peak above $87 hit
in early May.
Front-month European Brent <LCOc1> futures, which expire at
close of trade, rose 99 cents to $76.19, just off a session high
of $76.26.
The market will take further direction from industry data
for publication at 2030 GMT, followed by government data on
Wednesday, which will provide the next indication of supply and
demand from the world's biggest energy consumer the United
States.
A preliminary Reuters poll of analysts [] predicted
unrefined crude inventories would have fallen by 1.4 million
barrels in the week to June 11.
Stores of refined products were expected to have increased
slightly. Distillate fuel, including heating oil and diesel, was
forecast to rise by 800,000 barrels and gasoline inventories by
500,000 barrels.
FINANCIAL MARKETS
Unless there are any major surprises, analysts expect oil to
remain closely correlated to international financial markets.
"Today there is only one global market. There is a very high
correlation between oil and equities," said Olivier Jakob of
Petromatrix. "To break away from that correlation is going to
take something very significant."
The MSCI All-Country World Index <.MIWD00000PUS> reversed
earlier losses linked to Greece's troubles to gain a meagre 0.06
percent.
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The depth of Europe's problems has raised the possibility
even Asian demand for fuel, long-regarded as an all-but
infallible driver of future consumption, could wane.
China's Banking Regulatory Commission (CBRC) said on Tuesday
the global economic recovery was likely to be "slow and
tortuous" and China faced risks from a multitude of factors
including trade protectionism and bad real estate loans.
[]
Overall, demand from China, the world's second-largest
energy consumer, was expected to stay robust.
The Paris-based International Energy Agency said last week
in its monthly market report Chinese demand had grown by 12.7
percent in April year-on-year. []
Analysts trawling for bullish factors have cited forecasts
the U.S. hurricane season, which runs until November, will be
particularly active [], with the potential to
disrupt oil infrastructure in the U.S. Gulf of Mexico and to
make BP's <BP.L> efforts to contain the biggest oil spill in
U.S. history even harder.
The oil market was monitoring a weather system that the U.S.
National Hurricane Center said had a 40 percent chance of
becoming a tropical cyclone in the next 48 hours.
[]
(Additional reporting by Alejandro Barbajosa; editing by Sue
Thomas)
