* Emerging market-led demand seen supporting prices -analyst
* Coming Up: U.S. construction spending for April; 1400
GMT.
* For a technical view, click: []
(Recasts with steady prices, adds oil spill, graphic with RSI)
By Alejandro Barbajosa
SINGAPORE, June 1 (Reuters) - Oil was steady around $74 on
Tuesday, erasing earlier gains, after Chinese factory data
signaled economic growth at the world's second-largest user
slowed, adding to concerns about Europe's recovery.
China's factories scaled back production last month and
slowed the pace of hiring, the purchasing managers' index (PMI)
for May showed on Tuesday. []
"The PMI number might be priced into the market briefly,"
said Peter McGuire, managing director of Commodity Warrants
Australia in Sydney. "It may trigger some profit-taking."
"It sure didn't hit the target, but it wasn't too far out."
China's PMI, an indicator of factory activity, compiled by
the China Federation of Logistics and Purchasing fell to 53.9
in May from 55.7 in April, close to analysts forecasts of 54.0.
However, it stood above the threshold of 50 that demarcates
expansion from contraction for the 15th consecutive month.
U.S. crude for July delivery <CLc1> was at $74 a barrel at
0537 GMT, up 3 cents from Friday's close, after trading above
$75 earlier. Prices have dropped 15 percent from an early-May
peak.
Trade was thin and there was no settlement price on Monday
because of the Memorial Day holiday in the United States. The
New York Mercantile Exchange will combine Monday's and
Tuesday's trading sessions into one.
ICE Brent crude for July <LCOc1> slid 42 cents to $74.23
from Monday's settlement after touching $68.15 a week ago, the
lowest intraday price for a front-month contract since Feb. 5.
MARKET SEEN TIGHTENING
"I don't think prices will fall further," said Serene Lim,
a Singapore-based oil analyst at ANZ.
U.S. crude posted its biggest monthly loss since 2008 in
May after the European economic crisis raised the prospect of
reduced fuel demand.
Euro zone economic sentiment unexpectedly fell last month,
data showed on Monday, an indication that the region's debt
crisis has begun affecting the real economy. []
The euro and Asian stocks slid on Tuesday with creeping
suspicion that a peak in the recovery has passed and slowing
growth in China and Europe in the second half of the year will
be obstacles to risky trades. []
The relative strength index (RSI) for U.S. crude, a chart
indicator based on trading volumes that signals whether a price
drop or increase has gone too far, has now returned to average
levels, suggesting U.S. crude is no longer oversold.
For a graphic of the RSI for U.S. crude:
http://graphics.thomsonreuters.com/gfx/CT_20100106130413.jpg
"Looking at the supply-demand balance, it seems to be
tightening, considering that emerging markets such as China are
reporting relatively strong economic numbers. We will see
tightening balances in the second half of the year."
Going forward, supply could also be impacted by decisions
taken to restrict offshore drilling in the wake of the worst
oil spill in U.S. history -- the giant slick from BP's
blown-out Gulf of Mexico well, the analyst said.
The oil spill may not be shut off until August, U.S.
government and BP <BP.L> officials warned, as the company
begins preparations on a new but uncertain attempt to contain
the leaking crude. []
The environmental catastrophe led the U.S. government to
stop issuance of new exploratory drilling permits in deep water
for six months and declare a ban that effectively idles
operations of 33 deepwater exploratory rigs for the same
period.[]
"That would have a longer-term effect, depending on how
offshore water drilling will pan out," Lim said
(Editing by Himani Sarkar)
