* Oil rose with stronger yuan-mid point, rally fizzled later
* Coming Up: API U.S. weekly petroleum stocks; 2030 GMT
* For a technical view, click: []
(Adds context on technical indicators, updates prices)
By Alejandro Barbajosa
SINGAPORE, June 22 (Reuters) - Oil fell as much as 0.8
percent towards $77 on Tuesday on speculation that a gradual
appreciation of the yuan would have a limited impact on China's
petroleum imports in the short term.
China's spot yuan <CNY=CFXS> soared on Tuesday, after the
central bank set the currency's daily mid-point <CNY=SAEC> at
the highest level against the dollar since a revaluation in
July 2005, signaling the yuan's ascent may continue.
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The July contract for U.S. crude <CLc1>, which expires at
the end of Tuesday's trading session, fell as much as 63 cents
to $77.19 a barrel, virtually erasing Monday's gain, and was
down 43 cents at $77.39 at 0440 GMT. It briefly turned positive
when the People's Bank of China strengthened Tuesday's yuan
mid-point.
"Perhaps the market overreacted a bit over the short term,"
said Yingxi Yu, a Singapore-based commodities analyst with
Barclays Capital.
The more active August contract <CLc2> for U.S. crude,
which will become the front month from Wednesday, also shed 43
cents to $78.18, tracking Asian stock markets, with the Nikkei
slipping as profit-taking emerged after a bounce to a one-month
high the day before. []
"It's a positive boost to sentiment following a period of
severe risk aversion that has been hitting risky assets
including oil, but in terms of the impact on Chinese
commodities demand, it's more ambiguous," Yu said.
Front-month U.S. crude touched an intraday 6-1/2-week high
near $79 a barrel on Monday, but pulled back as charts
indicated technical resistance. Although prices have recovered
by 20 percent from a trough below $65 on May 20, they are still
about $10 lower than an early-May 19-month high above $87.
Crude's failure to breach strong resistance at $78.40 --
the 61.8 percent Fibonacci retracement on the move from $87.15
to $64.24 -- brings a new target of $76.50 into play, according
to a Reuters market analyst. []
ICE Brent for August <LCOc1> declined 53 cents to $78.29.
YUAN-FUELLED RALLY
Monday's crude rally came after China's central bank
allowed the yuan <CNY=CFXS> to surge by nearly 0.5 percent
against the dollar in the spot market, the daily limit,
following a pledge at the weekend to make the currency more
flexible.
That led to a commodities rally on Monday amid prospects
for increased buying power from China.
"The increase in purchasing power for China over the medium
term could be a positive thing for prices, but in the short
term the actual change in Chinese demand is going to be very
modest," Yu at Barclays said.
"We do not expect a major single one-off appreciation in
the yuan. This strengthening of the band and a more flexible
exchange rate is in line with our expectations."
A Reuters poll of analysts showed Chinese authorities will
only allow up to a 2.4 percent rise for the yuan against the
dollar by the end of 2010, keeping its word that it will keep
the currency basically stable. []
U.S. stocks fell and metals pared gains on Monday on
uncertainty over how much China would let the yuan rise after
it vowed to allow a more flexible exchange rate. []
Crude inventories in the U.S. dropped by 1.3 million
barrels last week as imports declined, a preliminary Reuters
poll of analysts showed on Monday, before Tuesday's weekly
industry report from the American Petroleum Institute at 2030
GMT. []
The poll also forecast an average 1.3 million barrel
increase in distillates and a slim 100,000 barrel decline in
gasoline stocks, ahead of U.S. government statistics to follow
on Wednesday from the Energy Information Administration.
Oil services companies went to court on Monday seeking to
overturn U.S. President Barack Obama's six-month ban on
deepwater drilling in the Gulf of Mexico after the worst oil
spill in U.S. history. []
(Editing by Ed Lane, Himani Sarkar)
