Oil held steady near $77.50 on Wednesday, as rising stock markets and a forming Atlantic storm countered mixed U.S. inventories and disappointing housing data.
U.S. crude for September, the front month-contract after Tuesday's expiry of August, rose 5 cents to $77.63 a barrel at 0653 GMT (2:53 a.m. EDT). ICE Brent gained 3 cents to $76.25.
Asian equities rose on Wednesday, with Indonesia's benchmark index at a record high, on the back of Wall Street gains prompted by Apple's strong earnings and speculation that Fed Reserve Chairman Ben Bernanke may suggest steps to spur lending in testimony to U.S. lawmakers later in the day. .T
But some of the price signals for the physical oil markets were at loggerheads with the upbeat equity outlook.
U.S. crude inventories fell a smaller-than-expected 241,000 barrels in the week to July 16, according to weekly industry data from the American Petroleum Institute (API) published late on Tuesday.
U.S. products demand is still relatively week, said Serene Lim, a Singapore-based oil analyst at ANZ.
The earnings season seems favorable, except for a few disappointments from Goldman and IBM.
Wall Street shrugged off disappointing reports from Goldman Sachs Group Inc (GS.N) and International Business Machines Corp (IBM.N) and bounced from early lows to end in positive territory on Tuesday. Data showing U.S. housing starts fell more than expected in June to the lowest level in eight months had also dampened markets earlier.
Government statistics expected to show U.S. crude stockpiles dropped by 1.4 million barrels will follow the API data from the Energy Information Administration on Wednesday at 1430 GMT.
For distillate fuels including heating oil and diesel, the average forecast was for an increase of 1.7 million barrels, extending gains to the eighth straight week, a Reuters poll showed. For gasoline, stocks could have risen 900,000 barrels. That would be the fourth consecutive week stocks have increased.
POTENTIAL STORM FORMING
On a possibly more bullish note, the U.S. National Hurricane Center raised the likelihood that a tropical depression or a tropical storm would form over Puerto Rico and Hispaniola in the next two days to 70 percent from 60 percent late on Tuesday. The storm could eventually reach the oil-rich Gulf of Mexico.
The center has forecast this year's Atlantic storm season may be the most intense since 2005, when hurricanes Katrina and Rita nearly paralyzed U.S. oil output and refining along the Gulf coast.
Investors have been pricing in this potential storm threat, Lim said.
Oil prices have been stuck in a range between $71 and $80 for more than six weeks, squeezed by a crude market that is slowly tightening and disappointing U.S. economic data.
BP Plc (BP.L) (BP.N) rejected a Times of London report on Wednesday that chief executive Tony Hayward was to step down within the next 10 weeks.
(Editing by Ed Lane)