* U.S. July crude contract expired on Tuesday
* U.S. crude oil inventories probably fell last week-poll
* Coming up: EIA inventory data, 10:30 a.m. EDT Wednesday (Updates with API inventory data)
By Robert Gibbons
NEW YORK, June 22 (Reuters) - Crude oil futures fell on Tuesday on lowered expectations about a demand boost in China and a combination of mixed economic data as the U.S. front-month July contract expired.
Expiring front-month U.S. July crude <CLN0> fell 61 cents, or 0.78 percent, to settle at $77.21 a barrel, bouncing from an early $76.53 low and having traded as high as $78.10.
U.S. crude for August <CLQ0>, taking over as front-month, fell 76 cents, or 0.97 percent, to settle at $77.85 a barrel, having seesawed in tandem with the July contract.
In London, ICE Brent for August <LCOc1> fell 78 cents to settle at $78.04 a barrel.
"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.
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.
Oil seesawed with Wall Street, which was hemmed in initially by data showing sales of existing homes fell unexpectedly in May before suffering a late-day sell off. [
]Global stocks fell as a downgrade of BNP Paribas <BNPP.PA> by Fitch ratings agency hit banking stocks and led to an end of a nine-day rally. [
]"Crude faded at expiration. The market digested the China move and wasn't helped by a combination of worries about banks and Europe and the MasterCard (gasoline) demand figures, and uncertainty is not a positive for the market," said Gene McGillian, analyst, Tradition Energy in Stamford, Connecticut.
MasterCard's SpendingPulse report said U.S. weekly retail gasoline demand rose 0.4 percent last week versus the previous week. But demand dropped 2.7 percent against the 2009 period and over the previous four weeks, demand was down 0.4 percent versus the same period in 2009. [
]Adding pressure to oil futures on Tuesday was news that a U.S. judge blocked the Obama administration's six-month ban on deepwater drilling imposed in the wake of BP Plc's <BP.L> Gulf of Mexico oil spill. [
]The White House said it would appeal the judge's ruling, issued in New Orleans after oil companies involved in offshore drilling operations challenged the moratorium.
Both oil and natural gas futures prices had been bolstered by the prospect of lost supply going forward.
U.S. INVENTORIES
A Reuters analyst poll on Tuesday ahead of weekly inventory reports forecast U.S. crude stocks to have fallen 800,000 barrels last week. Gasoline stocks were expected to be down 100,000 barrels and distillate inventories up 1.3 million barrels. [
]The industry group American Petroleum Institute's report released late on Tuesday, after crude prices had settled, showed a surprise build of crude stocks, by 3.7 million barrels. [
]Gasoline stocks rose 810,000 barrels and distillate stockpiles rose 1.1 million barrels, the API said.
The U.S. Energy Information Administration's report will be released on Wednesday at 10:30 a.m. EDT (1430 GMT).
Front-month U.S. crude posted a $78.92 a barrel intraday high on Monday, but pulled back as charts indicated technical resistance. Prices have recovered about 20 percent from a trough below $65 on May 20, they are still more than $9 lower than the 19-month high of $87.15 hit on May 3.
(Graphic http://r.reuters.com/dyc53m)
U.S. 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 amid expectation the currency flexibility would increase China's buying power after China's central bank allowed the yuan to rise by nearly 0.5 percent against the dollar in the spot market, the daily limit.
On Wednesday, the U.S. Federal Reserve's Federal Open Market Committee will conclude its two-day meeting, with financial markets expecting that low interest rates will remain intact. Low interest rates reduce investor borrowing costs, including for the oil trade. (Additional reporting by Gene Ramos in New York, Christopher Johnson in London and Alejandro Barbados in Singapore; Editing by Sofina Mirza-Reid)