* U.S. oil demand jumps 6.9 pct led by distillates -EIA
* Coming Up: U.S. U.S. Q1 Real GDP; 1230 GMT
* For a technical view, click: []
By Alejandro Barbajosa
SINGAPORE, May 27 (Reuters) - Oil hovered near $71 a barrel
on Thursday as concern about Europe's debt crisis and falling
stock markets outweighed data showing U.S. demand is surging.
A Wednesday report signaling China may review its euro-zone
debt holdings fed investor concerns that the European debt
crisis could reverse the global economic recovery, sending the
Nikkei to a fresh six-month low on Thursday.
"On the negative side, there was some report out of China
about the percentage of assets that they would allocate to
European bonds, a further sign of falling confidence in the
euro area," said Ben Westmore, a commodities analyst at
National Australia Bank.
"Oil will largely follow equity markets. They are probably
the foremost gauge about where confidence is at the moment. If
you see falls and increased risk aversion and a move to the
dollar, it's going to have downward influence on oil as well."
U.S. crude for July <CLc1> fell 71 cents to $70.80 a barrel
at 0206 GMT, while ICE Brent <LCOc1> shed 61 cents to $71.13.
But U.S. crude prices on Wednesday posted their biggest
gain in nearly eight months, adding 4 percent to a one-week
high near $72, after the Energy Information Administration said
U.S. oil-product supplies fell last week. []
"We saw a very positive reaction in the markets in terms of
the data flow," Westmore said.
"The distillate stocks, when you account for seasonality,
are still very high -- we put them 30 percent above normal --,
but a fall in gasoline and distillates is a good sign. We are
at least moving in the right direction."
Oil demand in the U.S. climbed almost 7 percent over the
past four weeks, a government report showed on Wednesday, led
by a 16 percent jump in demand for distillates, a category that
includes diesel and heating oil.
"U.S. oil demand is currently surging to a degree that has
not been seen for many years," Barclays Capital analyst Paul
Horsnell said in a weekly report.
"The demand surprise has been of a very significant scale,
and the most important element of that has been the whiplash
upwards in diesel demand."
Diesel consumption is an important gauge of economic
activity because it is used for trucking and industry.
Investors were expected to look out for continued evidence
of a rebound in U.S. economic activity after reports on
Wednesday showed a surge in durable goods orders and new home
sales for April.
U.S. preliminary first-quarter Gross Domestic Product
figures will be published at 1230 GMT.
The data will show "whether the recovery is unfolding as
expected," Westmore said.
Crude stockpiles at the Cushing, Oklahoma, pricing point
fell from record levels last week, the EIA report showed. But
the nation's total crude inventories gained a
larger-than-anticipated 2.4 million barrels.
U.S. crude is still down almost 19 percent from an
early-May 19-month high above $87.
(Editing by Ed Lane)
