Oil traded unchanged, slightly below $69 on Tuesday, capping losses as buoyant equities and the dollar's fall against the euro helped to offset concerns about an inventory build ahead of the U.S. autumn season.
While analysts expect the market to be cautious until details emerge of how regulations on position limits would be imposed, they expect only indirect impact from fears about any U.S-China trade dispute, with a bigger role for equities and the dollar.
Equities are doing somewhat better in Asia today, continuing the trend from the United States, said Victor Shum, a Singapore-based analyst at Purvin and Gertz. The primary factors for the market are strong equities and a weaker dollar against the euro.
NYMEX crude for October delivery fell 6 cents to $68.80 a barrel by 0608 GMT (2:08 a.m. EDT), after settling down 43 cents on Monday, while ICE Brent lost 29 cents to $67.15.
Oil has more than doubled from this year's low of $32.70 struck on January 20, but is still 53 percent below its record high of more than $147 hit in July 2008. The market this year has failed to move above the $75-level struck on August 25.
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The devil is in the details of the regulations, Shum added. And until we know the details, the market will be a bit cautious but not unduly worried.
While the euro climbed to stay in sight of its 2009 highs, supported by growing talk that Asian central banks were bidding the single currency and moving away from the U.S. dollar, Japan's Nikkei stock average squeezed out gains of 0.1 percent, buoyed by Toyota Motor Corp <7203.T> and other exporters.
China's key stock index opened up 0.08 percent on Tuesday, as traders added that the impact of the U.S. decision to impose special duties on Chinese tire exports would be limited.
The impact of that trade war is only on equities. And since oil is following equities, you could argue that the impact is somewhat indirect, Shum added.
Oil prices would struggle to rise above $75 in the short term because of plentiful product stocks as the U.S. autumn season approached, Shum added.
There is an overhang of distillates and fundamentals remain weak. These factors will combine to keep a lid on oil prices.
A preliminary Reuters poll ahead of weekly petroleum inventory reports showed forecasts for a 2.7-million-barrel drawdown in domestic crude stocks, a 1.5-million-barrel increase in distillate supplies and an 800,000-barrel build in gasoline stocks.
Industry group the American Petroleum Institute (API) will release its inventory data later on Tuesday, while the U.S. Energy Information Administration, a government agency, will issue its own report on Wednesday. (Editing by Clarence Fernandez)