Oil prices steadied around $59 a barrel on Tuesday after settling a day earlier at a six-month high on supply concerns from Nigeria and a key U.S. refinery, as investors looked to equities and the dollar for further cues.
U.S. crude rose almost 5 percent on Monday after Nigerian militants threatened to blockade waterways in the Niger Delta and disrupt crude exports from the OPEC country, and after they said they had blown up two oil and gas pipelines.
An explosion at Sunoco's 178,000 barrels per day Marcus Hook refinery on the U.S. East Coast set a fire and disrupted output, pushing U.S. gasoline futures to a 7-month high as the country heads into the peak summer driving season.
U.S. crude for June delivery, which expires later in the day, slid 3 cents to $59.00 a barrel by 0216 GMT, after touching on Monday its highest settlement since November 11.
London Brent for July fell 14 cents to $58.33. It's just one night but let's see where this rally brings us. I believe in the equities story... and the U.S. dollar, that's going to be the number one factor, Peter McGuire, managing director of Commodity Warrants Australia, said.
The dollar rose against the euro and sterling but held steady against the yen on Tuesday. A stronger dollar makes oil more expensive for holders of other currencies.
Asian stocks were lifted on Tuesday by Wall Street's overnight gains of around 3 percent, with Tokyo's Nikkei average <.N225> up 2.8 percent by the midday trading break. <.T> <.N>
Oil prices have risen from a near five-year low of $32.40 touched in December, tracking gains in stock markets over the last few months as investors looked to equities for signs of recovery in the economy and ailing oil demand.
U.S. crude inventories probably fell last week by 700,000 barrels, while gasoline inventories fell 1.0 million barrels and distillate stocks were up 800,000 barrels, a preliminary Reuters poll ahead of weekly inventory data showed.
The American Petroleum Institute will release its inventory report later on Tuesday and the U.S. Energy Information Administration will issue its own report on Wednesday.
Traders will also look out for the weather after forecasters said a strong rain storm off the east coast of Florida had the potential to develop into the first named storm of the 2009 Atlantic hurricane season.
Powerful tropical storms and hurricanes can disrupt operations at offshore oil platforms and coastal refineries.
(Reporting by Chua Baizhen, Editing by Clarence Fernandez)