Oil hovers around $71, euro concerns weigh

LONDON: Oil hovered around $71 a barrel on Tuesday as concerns about the euro zone crisis subdued optimism over US demand, ahead of data expected to show a fall in crude stocks in the world's largest fuel user.

European stock markets fell on Tuesday as worries about debt problems in Hungary added to jitters about fiscal health in European economies, which could curb future fuel demand. Front-month US crude, down 17 per cent from a 19-month high above $87 in early May, dipped 44 cents to $71.02 by 0927 GMT.

ICE Brent fell 46 cents to $71.08. US crude inventories were expected to have fallen for the second straight week as import volumes declined, a Reuters poll of analysts said ahead of weekly oil stocks reports this week.

Industry group the American Petroleum Institute will publish inventory figures on Tuesday at 2030 GMT, while the more closely watched government statistics from the US Energy Information Administration to follow on Wednesday at 1430 GMT. "The stock data will have a significant impact as it will be the first giving indications of the driving season. The shape of the US gasoline demand will be really important," said Christophe Barret, oil analyst at Credit Agricole.

Oil fell below $65 last month when the June contract expired but futures have since recovered with investors seeming happy to buy into any dip, keeping prices in a $70-$75 range. $70-$75 RANGE "Prices looks fairly stable around $72. We've moved to a price level between $70-$75 that seems to be acceptable by everyone and by OPEC," Barret said. Saudi Arabia's influential oil minister said in remarks published on Monday that oil prices would stay in the "ideal realm" of $70 to $80 a barrel.


The European debt crisis and the weak US jobs picture could mean a cut in oil demand projections from leading forecasters this week, which would pressure oil prices. The US Energy Information Administration, the first of three widely watched oil reports that will be released this week, is expected to claw back on Tuesday some of the oil demand growth it had been looking for.

The Organization of the Petroleum Exporting Countries (OPEC) releases its oil outlook on Wednesday followed by the International Energy Agency's (IEA) forecast on Thursday. The IEA, adviser to industrialised nations, is also likely to cut its estimates of Gulf of Mexico oil production for 2015 by 100,000-300,000 barrels per day (bpd) due to potentially tighter U.S. legislation on deepwater drilling following BP's spill.

Britain said it would increase its inspection of North Sea drilling rigs and monitoring of offshore practices in the light of the BP oil spill in the Gulf of Mexico, in a move likely to be part of many regulatory changes on deepwater projects around the world.

BP said on Monday its cap system captured 7,541 barrels of oil in the 12 hours through to noon, which could bring the daylong total to more than 15,000 -- the company's highest capture rate yet.