* Dollar firms against the euro
* China May diesel exports fall as domestic sales rise
* World Bank ups China 2009 GDP growth outlook to 7.2 pct
(Recasts, updates prices)
By David Sheppard
LONDON, June 18 (Reuters) - Oil eased below $71 a barrel on
Thursday, reversing early gains as the dollar firmed and equity
markets slipped.
U.S. crude <CLc1> fell 28 cents to $70.75 a barrel by 1139
GMT, and Brent crude <LCOc1> fell 33 cents to $70.52 a barrel.
"Recently, the oil market is looking more at the correlation
between the euro and the dollar," said Ryuichi Sato, an analyst
at Tokyo-based Mizuho Corporate Bank.
The dollar firmed against the euro on Thursday as European
shares turned lower. [] The U.S. unit initially slipped
close to $1.40 against the single currency.
A stronger dollar makes commodities priced in the greenback
more expensive for holders of other currencies, and vice versa.
The fifth straight day of drops in European equities also
weighed on prices, with concerns over the fragility of any
economic recovery prevalent across markets. []
Oil prices have been trading in a tight range around $70 a
barrel over the past week, as investors assess whether the rally
which has seen prices more than double since February will
continue.
SIGNS OF RECOVERY?
Oil prices had initially inched higher on Thursday after
Chinese oil data showed diesel exports fell to 390,000 tonnes in
May from 510,000 tonnes in April, as oil firms kept more fuel at
home on rising demand and falling stockpiles. []
The Chinese customs data came as the World Bank raised its
forecast for gross domestic product growth this year for the
world's third-largest economy to 7.2 percent from the 6.5
percent projected in its previous quarterly report in March.
The World Bank said a massive policy stimulus should enable
China to keep growing at a respectable rate this year and the
next, but a robust recovery was unlikely given global weakness
and softness in non-government investment. []
Growing demand for oil from emerging economies like China
and India was one of the main reasons prices spiked to record
highs near $150 a barrel last year, before the economic crisis
crimped consumption across the globe.
"Demand is certainly lower than last year but there are
tentative signs of improvement," analyst Andrey Kryuchenkov at
VTB Capital in London said.
Falling crude inventories and an uptick in gasoline demand
in the United States also supported prices, but enough concerns
remain about the strength of global demand during the recession
to leave prices vulnerable to a correction, analysts said.
The U.S. Energy Information Administration (EIA) reported a
much higher than expected fall in crude stockpiles in the week
to June 12, by 3.9 million barrels. []
Gasoline demand in the world's top consumer rose over the
last four weeks according to the EIA, boosted by lower prices at
the pumps compared with last year.
But demand for oil products as a whole was still down 6
percent on last year as the recession has slashed demand for
more industrial fuels like diesel, heating oil and jet fuel.
(Additional reporting by Chua Baizhen in Singapore; Editing by
Sue Thomas)
