* Oil reverses early gains
* U.S. distillates stocks at highest level in nearly 25 yrs
(Updates prices, adds details)
By David Sheppard
LONDON, July 9 (Reuters) - Oil reversed early gains and
dropped below $60 a barrel on Thursday as a downturn in U.S.
equities added to pressure from high U.S. oil inventories and
persistent concerns about the timing of any economic recovery.
U.S. light crude for August delivery <CLc1> fell 45 cents to
$59.69 a barrel by 1428 GMT -- on course for the seventh
straight day of declines. London Brent crude <LCOc1> eased 11
cents to $60.32 a barrel.
Earlier on Thursday, U.S. crude prices had rebounded as high
as $61.62 after a 4 percent fall on Wednesday that meant oil was
more than 15 percent lower so far in July.
Analysts said oil markets on Thursday were undermined when,
after a bounce in European shares, U.S. equities turned lower
shortly after the opening []. The slide was given impetus by
the breach of psychological support around the $60 a barrel
mark.
"This morning's bounce served notice that the equity and
currency markets remain as formidable price influences to the
oil," said Jim Ritterbusch, President of Ritterbusch and
Associates in Galena, Illinois.
"The crude, stock market and U.S. dollar are maintaining
some correlation to reflect an expansion and contraction in risk
appetite as additional economic input is received."
On Wednesday, bearish U.S. oil data highlighted how weak
demand is in the world's largest energy consumer.
U.S. diesel and heating oil stocks have swelled to their
highest level in almost 25 years after jumping by 3.7 million
barrels last week, data from the Energy Information
Administration (EIA) showed. []
The drop in oil prices since the end of June was the
longest and steepest decline so far in 2009. Prices had been
rising since February, more than doubling from lows hit near
$33, as traders started to price in an eventual recovery.
But many analysts cautioned prices had risen ahead of the
real economy, with unemployment still climbing and global oil
inventories mounting up.
"The buy-side euphoria associated with the 'recovery trade'
now clearly seems to have waned," MF Global analyst Edward Meir
said.
The fragile state of the global economy dominated the annual
G8 summit, with the United States, Japan, Germany, France,
Britain, Italy, Canada and Russia acknowledging there were still
significant risks to financial stability. []
OPEC's 2009 World Oil Outlook has weighed further on
sentiment as it said world demand for oil may take years to
recover from the slump in 2009 because of economic weakness and
demand destruction.
The Organization of the Petroleum Exporting Countries (OPEC)
said consumption of its crude will not return to 31 million
barrels per day (bpd), the level it averaged in 2008, until
2013. [].
(Additional reporting by Maryelle Demongeot in Singapore;
Editing by Anthony Barker)
