* 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 detail, prices)
By Christopher Johnson
LONDON, June 22 (Reuters) - U.S. crude oil fell below $77
per barrel on Tuesday as stock markets slipped and on
expectations that a gradual rise of China's yuan currency would
have a more limited impact on global demand than anticipated.
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 let the currency rise slowly,
spurred hopes that China would import more goods, including raw
materials such as metals and oil. []
But the yuan slipped later on Tuesday and analysts said the
impact of the 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.
"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."
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, fell to a low of $76.65 a barrel, down $1.17, before
ticking up slightly to trade at $76.66 by 1000 GMT.
U.S. crude for August <CLc2>, which will become the front
month from Wednesday, shed $1.21 cents to $77.40.
ICE Brent for August <LCOc1> declined $1.10 to $77.72.
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.
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For a graphic comparing China's crude imports and output:
http://graphics.thomsonreuters.com/gfx/CT_20102206135941.jpg
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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)
