* Equities rally after strong earnings
* Fundamentals of supply and demand still weak
(Updates throughout, previous SINGPORE)
By Barbara Lewis
LONDON, July 21 (Reuters) - Oil edged above $64 a barrel on
Tuesday, supported by climbing equities markets, but sapped by
forecasts the next figures on U.S. supply and demand would show
stocks of refined products have risen again.
By 0932 GMT, U.S. crude futures <CLc1> were trading three
cents higher at $64.01 and Brent crude <LCOc1> was six cents
weaker at $66.38. Tuesday's slim gains followed a 69 cent rise
the previous session.
The front-month August U.S. contract expires at close of
trade on Tuesday and will replaced by the September contract,
which fell 20 cents to $65.09.
Expectations economic recovery was under way helped to drive
oil to a peak above $73 a barrel at the end of June. Nervousness
confidence was overdone pushed prices back below $60 last week.
Analysts were divided over whether any gains, inspired by
what they describe as "exogenous factors", can be sustained in a
fundamentally oversupplied market.
"The market is see-sawing based on people's perception of
the U.S. economy -- they don't really know if the recovery is
durable, and they are trading based on available data that
offers clues on the outlook," said Tony Nunan, risk manager at
Mitsubishi Corp in Tokyo.
"But short-term fundamentals do not look strong because
inventories remain high, so we're going to be stuck in the $60s
to $70s range for a while."
The MSCI world equity index <.MIWD00000PUS> rose 0.5 percent
to levels close to the peak set in June, which was the highest
since last October.
"As long as the equities are gaining on the belief that the
worst is over, then it also translates into higher consumer
confidence, higher disposable income through the equity pick-up
and that ultimately impacts demand," said Olivier Jakob of
Petromatrix.
In the near term, demand has stayed weak even though the
U.S. driving season, traditionally a time of peak demand, is
near its height.
Weekly U.S. inventory data released at 2030 GMT on Tuesday
and 1430 GMT on Wednesday will provide the next supply and
demand snapshot.
Analysts have predicted a drop in overall fuel stocks, but a
rise in stocks of refined products, including gasoline and
diesel. []
Inventories in industrialised countries equated to 62.5 days
of forward cover at the end of May, according to the latest
figures from the International Energy Agency -- around 10 days
more than the Organization of the Petroleum Exporting Countries
considers comfortable.
Algerian Energy and Mines Minister Chakib Khelil on Monday
predicted prices would stay in a $65-$70 dollar range this year
as long as the market remained oversupplied and said OPEC could
cut output when it next meets in September if there was not
enough demand for its crude. []
Many analysts predict Asia will lead any demand recovery.
A slower rate of decline in domestic fuel sales has implied
demand in China, the world's second biggest oil user after the
United States, was strengthening.
Sinopec Corp's domestic sales of refined oil products fell
by 4.8 percent from a year earlier to about 31.28 million tonnes
in the past three months, a Reuters calculation showed, compared
with a 12.4-percent drop in the first quarter. []
Demand in the United States is expected to stagnate.
For the next pointers to the economic recovery that could
revive it, traders will be looking to Federal Reserve Chairman
Ben Bernanke's semi-annual testimony on the U.S. economic
outlook and monetary policy at 1400 GMT.
(additional reporting by Jennifer Tan)
