* European shares touch five-week high; correlation intact
* For a short-term technical outlook see: []
* Coming Up: API U.S. oil inventory report; 2030 GMT
(Recasts, updates prices)
By Emma Farge
London, July 27 (Reuters) - Oil prices rose towards $80 a
barrel to hit the highest level since early May as upbeat
corporate results and rallying equities increased risk appetite
for the commodity.
U.S. stock index futures jumped on Tuesday, setting Wall
Street for a fourth straight day of gains, while European shares
touched a five-week high. [] []
Rallying U.S. stock markets are seen as a broad indicator of
the future oil demand picture in the world's top consumer and
helped to banish persistent fears of a double dip recession.
U.S. oil prices <CLc1> rose 14 cents to $79.12 a barrel by
1338 GMT after earlier trading at $79.69 a barrel -- the highest
intraday level since May 6.
Earlier, prices had turned negative as more oil production
capacity shuttered in the U.S.-regulated areas of the Gulf of
Mexico started coming back onstream. []
ICE Brent <LC0c1> rose 26 cents to $77.76 a barrel by the
same time.
"I think you are looking at a situation whereby equity
markets and oil which have developed a positive correlation,"
said Harry Tchilinguirian, head of commodity strategy at BNP
Paribas.
He added that expectations the United States will start
printing more money in a second round of quantatitive easing has
increased the appeal of riskier asset classes.
News that U.S. home prices rose more than expected in May
also helped sentiment on Tuesday, adding to signs that the
economic recovery is intact. []
PRICE JUNCTURE
Oil prices are now at a critical juncture and it remains to
be seen if they will break into a new range above the $70-$80 a
barrel area where they have traded since early June, analysts
said.
"It's a mixed set of signals. The market is considering a
move above $80 and if they do it will be seen as a positive
sign. Should they stay below $80 a further drop cannot be ruled
out as people will point to a double dip recession and a Chinese
slowdown," said Eugen Weinberg, head of commodities research at
Commerzbank in Frankfurt.
Some technical analysts think oil prices could soon test the
$80 a barrel range following a breach of the key 200-day moving
average technical level last week
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic on the technical outlook, see:
http://graphics.thomsonreuters.com/WT/20102707085335.jpg
For a graphic showing the correlation of equities and
commodities, see:
http://graphics.thomsonreuters.com/F/07/CMD_CRRL0710.html
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Industry group the American Petroleum Institute will publish
data on U.S. inventories at 2030 GMT on Tuesday, followed by
government statistics from the Energy Information Administration
on Wednesday.
U.S. crude oil inventories probably fell 1.8 million barrels
last week, a Reuters survey showed, while supplies of distillate
fuel, including diesel, may have climbed for the ninth
consecutive week and gasoline for the fifth, even as summer
demand peaks. []
Iran said on Monday it was ready to return to talks on a
nuclear fuel swap, a surprise that came shortly after the
European Union agreed tougher sanctions, including a block on
oil and gas investment. []
"There is some suggestion that Iran might be giving up. This
could lead to a decrease in the risk premium in the market but
it's not clear yet," said Weinberg.
(Additional reporting by Alejandro Barbajosa in Singapore;
editing by Anthony Barker)
