Oil dipped below $63 a barrel on Tuesday, pressured by investors' caution over prospects for economic recovery and by an expected increase in U.S. gasoline stocks for the week when Americans traditionally drive the most.
U.S. crude futures fell $1.17 to $62.88 a barrel by 1405 GMT, reversing an earlier gain to as high as $64.91. London Brent crude was 92 cents lower at $63.13.
Oil prices have fallen from $73 struck in late June, with U.S. crude closing at $64.05 on Monday, its lowest settlement in more than a month.
Market jitters over economic recovery and an expected increase in U.S. gasoline stocks for the week of the July 4 Independence Day holiday pressured oil, said Harry Tchilinguirian, senior oil analyst with BNP Paribas.
Looking at another build in gasoline inventories, consumer confidence is weighed down by higher retail prices and rising unemployment and so the number of Americans taking to the road over the holiday weekend was probably lower than last year, Tchilinguirian said.
This is most likely part of the broader correction that we have been seeing over the past trading sessions. People are re-assessing the quality of the green shoots in the economy.
Analysts in a Reuters poll expected weekly data from the American Petroleum Institute (API) and U.S. Energy Information Administration to show increases by about 2.2 million barrels in gasoline stocks.
The expected increases in gasoline and middle distillate inventories are likely to overshadow any drop in crude inventories.
Industry group API will release its weekly crude and products stocks data at 2030 GMT on Tuesday and the EIA on Wednesday.
The EIA will release its monthly report later on Tuesday.
In June, it raised its forecast for 2009 world demand by 10,000 barrels per day (bpd) to 83.68 million bpd, the first time since September that it had increased the demand estimate in its rolling monthly forecast.
OIL PRICE REVISION
Despite the fall in July, oil prices have still risen from below $33 in December last year.
Bank of America-Merrill Lynch said earlier on Tuesday it had raised its oil price forecasts for 2009 to $59 a barrel for Brent and to $58.50 for U.S. crude, up from forecasts of $52 for both benchmarks.
Our price revisions come on the back of a weaker U.S. dollar, a significant improvement in liquidity conditions for the global economy, and a slightly tighter-than-expected global oil market balance, the bank said.
Limited support also continued to come from Nigeria, where militants have launched at least four attacks against oil installations in the past 10 days, helping to underpin prices on Tuesday.
The main militant group said on Monday it had sabotaged a Chevron oil facility and seized a chemical tanker and six crew members.
Royal Dutch Shell said there was no impact on its Nigerian oil production from an attack to its oil field on Sunday.
(Additional reporting by Ikuko Kao, editing by Anthony Barker)