Oil prices gave away early gains on Tuesday, easing toward $71 a barrel ahead of U.S. inventory data expected to show a rise in oil product stocks.

Earlier, prices leapt more than $1.50 in under half an hour around 0200 GMT as volumes traded on Brent and then U.S. crude oil surged to more than 10 times the norm.

The jump was thought to have been led by a sudden spike in Brent buying pinned on fund positioning.

Both prices and volumes cooled in European trade. U.S. crude for August delivery fell 12 cents at $71.37 a barrel by 1117 GMT, off its earlier eight-month high of $73.38.

Brent was down 20 cents to $70.79 a barrel.

Christopher Bellew, broker at Bache Commodities said of the turnaround on crude prices: Speculative buying maybe drying up and it could also be the prospect of product stock builds in the stats tonight.

Crude and oil products inventory numbers from the United States will be carefully watched on Tuesday and Wednesday for the latest indication of demand from the world's biggest fuel consumer.

A Reuters poll of analysts ahead of weekly data forecast U.S. crude stockpiles fell by 1.6 million barrels last week, while gasoline stocks were seen up 2 million barrels and distillate stocks rose 1.5 million barrels.

The American Petroleum Institute will release its weekly U.S. inventory at 2030 GMT, while the U.S. Energy Information Administration report is due out on Wednesday.


Driven by hopes of a global economic recovery, oil prices are on track to post a near 50 percent increase in the second quarter, the highest quarterly percentage gain since 1990.

Oil has rallied on hopes for an improving economic outlook and a growing appetite for risk among investors, a factor given further impetus by Asian and U.S. stock market gains.

Earlier on Tuesday, prices surged on unusually high Asian trading volumes, which some traders attributed to big fund players in the market.

This could be end of quarter movement, and traders are trying to push prices higher and then selling before closing their books, said Mark Pervan, senior commodities analyst at ANZ Bank. I haven't seen any new catalyst on the news front.

Oil prices were also supported by a weaker U.S. dollar on Tuesday, which can make commodities denominated in the currency more attractive to investors.

Unrest in Africa's top producer Nigeria has helped to underpin oil's gains this week as it increases expectations of a tightening of oil supplies from the region.

The country's main militant group said on Monday its fighters had attacked an oil facility belonging to Royal Dutch Shell days after President Umaru Yar'Adua proposed an amnesty.

(Editing by James Jukwey)