* Suez Canal traffic stays uninterrupted by unrest
* U.S. crude inventories seen up last week-poll
* Coming Up: API inventory report; 2130 GMT
(Updates prices, adds comments and dollar value)
By Seng Li Peng
SINGAPORE, Feb 8 (Reuters) - Oil prices reversed
earlier losses on Tuesday to rise above $87.50 a barrel,
but continuing smooth traffic through the Suez Canal, despite
political turmoil in Egypt, and expectations of a build-up in
U.S. crude inventories would probably continue to exert downward
pressure.
U.S. crude for March gained 13 cents to $87.61 a
barrel by 0752 GMT, while ICE Brent rose 41 cents to
$99.66 a barrel.
"The market is not strong fundamentally," said Tetsu
Emori, a fund manager at Tokyo-based Astmax Co Ltd.
"Most people are looking at the higher inventories, and
the pressure is building up."
Oil prices were struggling to sustain gains earlier in
the day before they fell below $87.30 a barrel at 0354 GMT.
"There's pressure for crude oil prices to go down," said Ken
Hasegawa, a commodity derivatives manager at Japan's Newedge
brokerage.
"Fundamentally, I don't think crude oil supplies are tight.
The market needs a correction, and now is the time," he said,
adding that prices were up on the political tension in Egypt.
"WTI should come down to $85 a barrel this month, while the
spread between WTI and Brent will likely be around $10."
Egypt, a small oil and gas exporter, controls the Suez Canal
and the Suez-Mediterranean (SUMED) oil pipeline, which together
account for nearly 3 percent of daily global oil demand.
While transit through the canal has so far been unaffected
by the crisis in the region, concerns remain that the turmoil
might spread across the Middle East.
Egypt continues to be plagued as protesters on
Tuesday called for a push to eject President Hosni Mubarak from
power after the government conceded little ground in talks with
the opposition and sought to squeeze demonstrators out of
central Cairo.
Global oil prices could exceed $110 a barrel if political
unrest in Egypt continues, Imad al-Atiqi, a member of Kuwait's
Supreme Petroleum Council said on Sunday.
Oil prices could also more than double to $200 per barrel if
the Suez Canal closes because of the crisis in Egypt, though
there is no sign of that happening at the moment, Venezuela's
oil minister Rafael Ramirez said last week.
Technical charts, however, turned bearish, indicating prices
may drop from current levels towards $85, according to Reuters
markets analyst Wang Tao.
For a 24-hour technical chart, see:
http://graphics.thomsonreuters.com/WT/20110802084336.jpg
CRUDE STOCKPILE SEEN UP
On the data front, investors were eyeing weekly inventory
reports from the United States on Tuesday and Wednesday for
trading cues.
The average crude stockpiles in the U.S. were forecast up
2.5 million barrels for the week ended Feb. 4 as refiners
continued to rebuild supply after drawing on inventories during
much of December for year-end tax trimming, a survey showed.
Crude stocks were expected to be beefed up by another
increase in oil stored at the Cushing, Oklahoma, delivery hub
for crude oil futures traded on the New York Mercantile
Exchange.
If that happens it would be a new peak at the hub, after
stocks there rose 667,000 barrels to a record 38.33 million
barrels in the week to Jan. 28, based on data from the U.S.
Energy Information Administration (EIA).
The dollar index , which tracks the greenback
against a basket of major currencies, fell 0.29 percent to
77.804 by 0753 GMT but was still above a three-month low of
76.881 plumbed on Wednesday.
A weaker greenback supports dollar-denominated
commodities such as oil, making it cheaper for those holding
other currencies.
(Reporting by Seng Li Peng; Editing by Himani Sarkar)
