* Falls in Asian shares, led by China, prompt drop in oil
* Eyes on U.S. oil stocks for direction, demand seen still
low
* Sustained economic recovery needs time to take hold
SINGAPORE, Aug 25 (Reuters) - Oil fell below $74 a barrel
on Tuesday, down for the first time in six days on softer Asian
shares as renewed concerns over the economic recovery emerged,
after reaching a 10-month high a day earlier.
Investors are looking to oil inventories in the United
States for direction, with analysts calling for a draw in crude
and gasoline stocks and an increase in distillates.
U.S. crude futures for October <CLc1> fell 53 cents to
$73.84 a barrel by 0307 GMT, after hitting their highest
intraday level since Oct. 21 at $74.81 on Monday. Brent crude
<LCOc1> shed 52 cents to $73.74.
"The drop is probably due to the decline in equities
markets today," said Tetsu Emori, a fund manager at Tokyo-based
Astmax Co Ltd.
"People are waiting for (U.S.) inventory numbers too.
Market fundamentals are still weak. While crude stocks may have
fallen, those for products are still high. The supply-demand
balance is weak."
An initial Reuters poll showed crude inventories for the
week ended Aug. 21 fell by 900,000 barrels, much smaller than
the unexpected 8.4 million-barrel draw in the week before, as
imports stayed low and refinery utilisation rose.
But forecasters called for a 200,000-barrel rise in
distillate stocks, while gasoline inventories could have also
eased by 900,000 barrels, as demand might have improved on late
summer vacation driving, which would make it the fifth-straight
week of falls. []
Data from the American Petroleum Institute will be released
at 2030 GMT on Tuesday, while the U.S. government data is due
out on Wednesday.
While the race towards $75 over the past week was spurred
by the equities rally, with the Dow Jones index <> also
briefly touching 10-month highs on Monday, oil prices were hit
by falling Asian stocks on Tuesday.
China's Shanghai stock index <> slid more than 3
percent after Premier Wen Jiabao said Beijing would keep its
monetary policy loose as the economy faces new difficulties,
including trouble boosting domestic consumption, while Japan's
Nikkei <> lost 0.8 percent.
Commodities markets have closely tracked equities indexes
in recent months, as dealers view stocks as a lead indicator of
economic performance.
It is too early to say the economy is on a strong footing
and it would take another six months to be sure that the
recovery is on track, Astmax's Emori said.
He saw $75 as a key resistance level. "Over $75, there is
no reason to buy under current fundamentals."
Oil and commodities traders will be keeping their eyes on
U.S. housing, consumer confidence and retail sales data due
later on Tuesday as pointers to the health of the world's
biggest economy, following upbeat remarks by the Fed chairman
and a surprising rise in home sales late last week.
That news was followed by reports showing new industrial
orders in the euro zone rebounded in June and U.S. economic
activity improved again in July. [] []
But as Asian shares fell, the dollar eased against the yen
<JPY=> as worries returned over the state of U.S. consumer
confidence.
(Reporting by Ramthan Hussain; Editing by Clarence Fernandez)
