* U.S. consumer confidence dips; awakens double dip fears
* For a short-term technical outlook see: []
* Coming Up: API U.S. oil inventory report; 2030 GMT
(Recasts, updates throughout)
By Emma Farge
LONDON, July 27 (Reuters) - Oil prices fell towards $78 a
barrel on Tuesday, reversing an earlier rally to the highest
level since early May, as negative U.S. macroeconomic data and
falling equities dampened buying interest for crude.
U.S. consumer confidence fell in July to the lowest level
since February, prompting U.S. stocks to give up short-lived
gains. [] []
U.S. equities are seen as a broad indicator of the future
oil demand picture in the world's top consumer and the intra-day
fall helped revive persistent fears of a double dip recession.
U.S. oil prices <CLc1> fell 62 cents to $78.36 a barrel by
1425 GMT after earlier trading at $79.69 a barrel -- the highest
intraday level since May 6.
ICE Brent <LC0c1> fell 55 cents to $76.95 a barrel by the
same time.
"The reaction is on the release of the (confidence)
data...The question is now how the market views the potential
for future Fed quantitative easing, given the weaker numbers,"
said Harry Tchilinguirian, head of commodity strategy at BNP
Paribas.
He added that expectations the United States will start
printing more money have increased the appeal of riskier asset
classes such as oil and equities.
Rising oil production capacity in the U.S. Gulf after the
Tropical Depression Bonnie also weighed on oil prices, analysts
said. []
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, who study price charts for clues to
future direction, think oil prices could soon challenge $80 a
barrel following a breach of the key 200-day moving average
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)
