UPDATE 6-Oil down on U.S. data after hitting two-week high

                                
 * Chicago PMI <USCPMD=ECI> lower than expected
                                
 * Oil may have found a floor for a while, some traders say
                                
 * Traditional U.S. "driving season" starts this weekend
                                
 * Coming Up: U.S. ECRI Leading Economic Index at 1430 GMT
                                
 
                                
 (Updates throughout)
                                
 By Christopher Johnson
                                
 LONDON, May 28 (Reuters) - Oil hit a two-week high above $75
on Friday but then fell back sharply after U.S. economic data
made investors more cautious on a range of riskier assets.
                                
 Business activity in the U.S. Midwest fell more than
expected in May as employment declined, the Institute for Supply
Management-Chicago business barometer showed. [ID:nN28172720]
                                
 The data helped raise risk aversion in a number of markets
with oil, metals and equities all slipping or losing some of
their earlier gains. [.N] [.EU] [MET/L]
                                
 But oil prices were still up more than 6 percent for the
week as a whole after official data earlier showing soaring fuel
demand in top consumer the United States.
                                
 Asian stocks rallied for a third day on Friday, with Japan's
benchmark Nikkei <.N225> rising 1.3 percent to its highest this
week. The FTSEurofirst 300 <.FTEU3> index of top European shares
up 0.2 percent. [MKTS/GLOB]
                                
 U.S. crude futures for July delivery <CLc1> jumped to a high
of $75.72, up $1.17 per barrel, before sliding back to $74.55 by
1406 GMT, unchanged on the day. ICE Brent <LCOc1> was up 6 cents
at $74.72.
                                
 "The Chicago PMI has knocked most markets," said Eugen
Weinberg, commodities analyst at Commerzbank in Frankfurt. "All
the commodities that worry about risk have softened -- oil,
metals, and so have equities."
                                
 Oil prices have been extremely volatile over the last three
weeks. U.S. crude hit an intra-day low of $64.24 on May 20 ahead
of the expiry of the June futures contract, almost $23 below its
peak at $87.15 on May 3, its level highest for 19 months.
                                
 This volatility has left investors wary but many oil traders
argue the market may have found a floor.
 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
                                
 For a graphic of the U.S. crude oil futures benchmark over
the last year, click: http://link.reuters.com/nuv86k
                                
 For a graphic of US crude versus euro/dollar:
                                
 http://link.reuters.com/duw86k
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 "We don't think we're far from the bottom," Marco Dunand,
president and chief executive of Mercuria Energy Trading told
the Reuters Global Energy Summit, adding "certain countries need
a $65-$70 kind of floor."
                                
 (For other news from the Reuters Global Energy Summit, click
on http://www.reuters.com/summit/GlobalEnergy10?pid=500)
                                
 
                                
 "FICKLE SENTIMENT"
                                
 But some analysts were cautious on the short term outlook.
                                
 "We would rather watch the action from the sidelines for at
least another few days to see whether the current bounce is
being led by a change of perceptions, or is merely another
ill-fated short-covering rally," said Edward Meir, senior
analyst at brokers MF Global.
                                
 Traders are keeping an eye on forecasts for the Atlantic
hurricane season that have revived concerns of disruption to
supplies in the Gulf of Mexico, where BP's <BP.L> attempt to
plug a gushing oil well continued.
                                
 In its first outlook for the hurricane season that begins in
June, the U.S. National Oceanic and Atmospheric Administration
forecast 14 to 23 named storms, with eight to 14 turning into
hurricanes, nearly matching 2005's record of 15. [ID:nN2798815]
                                
 Hurricanes Katrina and Rita devastated offshore oilfields
and refineries across Louisiana and Texas in 2005, causing the
most severe disruption to U.S. supplies from a natural disaster.
                                
 The U.S. driving season, when motor fuel demand
traditionally reaches its annual peak, starts this weekend with
the U.S. Memorial Day holiday, running until early September.
                                
 U.S. diesel demand for trucking and industry is rising, a
weekly government report showed on Wednesday.
                                
 Oil demand in the U.S. climbed almost 7 percent over the
past four weeks, the Energy Information Administration said, led
by a 16 percent jump in demand for distillates, a category that
includes diesel and heating oil.
                                
 The U.S. economy grew at a slightly slower pace than
previously estimated in the first quarter but the recovery still
appeared solid, suggesting the economy could withstand fallout
from the European debt crisis. [ID:nN27259780]
 (Additional reporting by Alejandro Barbajosa in Singapore;
editing by James Jukwey)