* U.S. crude inventories probably fell last week - poll
* Hurricane centre sees 50 pct chance of tropical cyclone
* For a technical view, click: []
* Coming Up: API U.S. weekly petroleum stocks; 2030 GMT
(Updates throughout, changes dateline from SINGAPORE)
By Christopher Johnson
LONDON, June 22 (Reuters) - U.S. crude oil fell below $78
per barrel on Tuesday on expectations that a slow appreciation
of the yuan would have a limited impact on Chinese oil imports
in the short term.
China's yuan <CNY=CFXS> rose on Tuesday after the central
bank set the currency's daily mid-point <CNY=SAEC> at its
highest against the dollar since a revaluation in July 2005.
The move, which followed an announcement by the Chinese
authorities that they would allow the currency to rise
gradually, spurring hoped that this could stimulate higher
imports of commodities and oil. []
But the yuan slipped later and analysts said the impact of
the Chinese changes would be limited, at least for a while.
"The knee-jerk positive reaction and euphoria related to the
yuan news were definitely overdone. So, it's logical to see the
markets giving up the gains from yesterday," said Eugen
Weinberg, head of commodity research at Commerzbank.
"Today the commodity markets again demonstrate that they are
under the spell and fate of the financial (equity) markets,
which are retreating. Also a weaker euro is contributing to the
drop," Weinberg added.
Stock markets slipped in Asia and Europe on Tuesday with
traders saying the optimism over China's move had dissipated and
as equity investors took profits from multi-week highs. []
The July contract for U.S. crude <CLc1>, which expires later
on Tuesday, was down 64 cents at $77.18 a barrel by 0830 GMT.
It had briefly turned positive when the People's Bank of China
strengthened Tuesday's yuan mid-point.
U.S. crude for August <CLc2>, which will become the front
month from Wednesday, shed 60 cents to $78.01.
ICE Brent for August <LCOc1> declined 53 cents to $78.29.
U.S. INVENTORIES
The oil market largely shrugged off expectations of a drop
in U.S. crude inventories in data due later this week.
A Reuters poll of analysts showed an average expectation for
a 1.3 million-barrel drawdown in U.S. crude stocks. []
The analysts issued their forecasts ahead of inventory
reports from industry group American Petroleum Institute, due
Tuesday at 4:30 p.m. EDT (2030 GMT), and the federal Energy
Information Administration on Wednesday at 10:30 a.m. EDT.
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. []
Monday's crude rally came after China's central bank allowed
the yuan 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.
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. []
China is the world's second-biggest oil consumer after the
United States, accounting for about 10 percent of global use.
But it is also the world's fifth-largest producer and in May it
pumped more oil domestically than it bought from abroad.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic comparing China's crude imports and output:
http://graphics.thomsonreuters.com/gfx/CT_20102206135941.jpg
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
A tropical wave in the central and eastern Caribbean,
spanning from northern Venezuela to Haiti, had a 50 percent
chance of becoming a tropical cyclone in the next two days, the
U.S. National Hurricane Centre said on Tuesday on its website.
(Additional reporting by Alejandro Barbajosa; editing by Alison
Birrane)
