Oil was steady above $67 a barrel on Tuesday, after falling the previous day to its lowest level in two weeks, amid persistent worries over the pace of the global economic rebound and revival in energy demand.
The market got some support from a bounce in equities but could see more downside after the release of weekly inventory data later from the American Petroleum Institute (API), and on Wednesday from the Energy Information Administration (EIA).
Key July housing data and producer prices due later will also shed light on the health of the U.S. economy.
Further price support could come from the rapid growth of Hurricane Bill, the first of this year's season, which might disrupt Gulf of Mexico oil and gas production.
By 2:45 a.m. EDT, U.S. crude for September delivery was up 44 cents at $67.19 a barrel. It had settled 76 cents lower at $66.75 on Monday, off a two-week low of $65.23 earlier. London Brent crude for October was up 12 cents at $70.66.
The tone is nervous, absolutely. The market is realizing that a lot of the recent gains have been based on very loose fundamentals, being driven out of equity markets, and that is vulnerable to a correction, said Mark Pervan, senior commodity strategist at ANZ in Melbourne.
Oil suffered its sharpest decline in two weeks last Friday after the Reuters/University of Michigan Survey of Consumers showed consumer confidence in early August dropped to the lowest level since March, casting doubts over the pace of recovery in the world's top energy consumer.
U.S. stocks suffered their worst loss in seven weeks on Monday as weak data from Japan and a disappointing outlook from retailer Lowe's Cos
The U.S. dollar and the yen both retained broad gains on Tuesday as uncertainty over the strength of a global economic recovery saw investors cut exposure to riskier assets and higher-yielding currencies.
The release of weekly API data at 4:30 p.m. EDT later could show U.S. crude stockpiles rising for the fourth straight week by 1 million barrels, as higher imports offset a slight rise in refinery activity, according to a Reuters poll of analysts.
Distillate stocks were seen up 400,000 barrels and gasoline stocks down 1.4 million barrels.
The U.S. Commerce Dept will unveil July housing starts and permits at 1230 GMT. Economists polled by Reuters forecast a rise to a 600,000 annualized rate from 582,000 in June, and a total of 580,000 building permits compared with 570,000 the prior month.
The Labor Department will also release the July Producer Price Index (PPI) at the same time. Economists forecast a 0.3 percent fall in prices compared with a 1.8 percent increase the prior month.
Hurricane Bill, the first hurricane of the 2009 Atlantic season, is expected to strengthen to a major category 3 storm by Wednesday, while the remnants of Tropical Storm Ana dissipated without threatening the U.S. Gulf oil patch, the U.S. National Hurricane Center said.
Energy markets are jittery over Gulf storms because the region produces a quarter of U.S. oil and 15 percent of its natural gas.
Certainly, news of hurricane activity will support prices. We see a trading range of $63-$70 for oil this week, Pervan added.
Meanwhile, the U.S. Commodity Futures Trading Commission (CFTC) is using new authority provided by Congress that gives the agency more oversight over contracts listed on exempt commercial markets, which plays an important role in setting the price for a commodity, Chairman Gary Gensler told Reuters in an interview.
As part of the broader regulatory overhaul promised by the Obama Administration, the CFTC held a series of hearings to examine position limits and which traders, if any, should be allowed to exceed those limits. The new rules on position limits could be set as early as autumn.
(Editing by Ben Tan)