>Crude steady around USD60; fundamentals weak

London - Nymex was broadly steady below $60 a barrel Monday in London, but high oil supplies and low demand continued to weigh on prices.

"Mounting stocks of oil around the world reflect the reality that oil demand remains on its knees," said analysts at KBC Market Services, a consultancy based in the U.K. "Market fundamentals are weak, and if anything getting worse rather than better."

At 1152 GMT, the front-month August Brent contract on London's ICE futures exchange was up $0.25 at $60.77 a barrel, bouncing into positive territory after an earlier selloff.

The front-month August contract on the New York Mercantile Exchange was trading $0.05 higher at $59.94 a barrel, also trimming earlier losses.

The ICE's gasoil contract for August delivery was up $8.25 at $494 a metric ton, while Nymex gasoline for August delivery was down three points at 165.02 cents a gallon.

Prices were bouncing from an oversold position, but the rebound was expected to be short-lived, according to several brokers in London. Oil has sold off nearly 20% in the last two weeks as the outlook for economic recovery - and by inference, oil demand - deteriorates.

"I think with the macro data and weaker equity markets, the market is a little uneasy about firming up too much," a broker said.

Apart from weak fundamentals, investor appetite for oil could be waning due to the potential for greater market regulation to be discussed at U.S. hearings later this summer.

"If these proposals are put in place, we believe the oil price will become more related to the industry's fundamentals," said analysts at Renaissance Capital in Russia. "In the short-term, this could drive oil price below $50 barrel amid excess supply and reduced demand."

Separately, Nigerian authorities Monday confirmed militants had attacked an oil tanker loading facility in Lagos harbor - the first by rebels in the country's main city. Military, police and government spokesmen all confirmed the attack on the Atlas Cove Jetty in Lagos harbor, claimed by the Movement for the Emancipation of the Niger Delta, or MEND.

The market largely shrugged off news of the attack, as violence and disruptions to Nigeria's oil production are largely priced in, brokers said.

"Nigerian news always seems to be taken in its stride - people just expect it now," a broker said.

Participants are still watching technical charts to glean whether oil's recent downward trend will continue.

"Brent still looks weak and could potentially pull back towards $58.31 a barrel once selling intensifies," said Andrey Kryuchenov, vice president of commodities research at VTB Capital in London. A sustained close below $60 a barrel would be "very bearish," he said.

Crude's appeal as inflation hedge fades for now
Crude oil futures remain pressured by a firming USD, and the commodity's use as an inflation hedge could diminish, says Marius Paun at ODL Securities. "Speculative interest in oil has been quelled especially after talks of trading limits and investors appearing to refocus on fundamentals," he says, adding it's "no surprise that crude's appeal as an inflation hedge is slowly starting to fade away for now." ICE August Brent crude -45c at USD60.07/bbl, Nymex August light, sweet crude -62c at USD59.27/bbl.

Source: COMMODITIESCONTROL