Oil hangs below $71 ahead of US Fed meeting

[August 11, 2009]  SINGAPORE (AP) -- Oil prices hung below $71 a barrel Tuesday in Asia as crude investors joined a pause in a stock market rally ahead of a U.S. central bank meeting.

Benchmark crude for September delivery was up 31 cents to $70.91 a barrel by late afternoon in Singapore in electronic trading on the New York Mercantile Exchange. On Monday, the contract fell 33 cents to settle at $70.60.

Crude has stuck near $71 a barrel for a week as traders look for clues about the health of the global economy and oil demand. The Dow Jones industrial average fell 0.3 percent on Monday and Asian indexes were mixed in early trading Tuesday.

"Crude has been highly correlated to equities," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. "We may see a test of $75 soon, but then I think there will be a correction next month in stocks and therefore crude."

A two-day meeting of the Federal Reserve starts Tuesday. This week the U.S. government will also report July retail sales and several major retailers will announce their second quarter results.

"I'm afraid the global fiscal stimulus is going to slowly fade," Moltke-Leth said. "And personal consumption in the U.S. is still a big problem despite all the stimulus."

In other Nymex trading, gasoline for September delivery rose 1.26 cents to $2.04 a gallon and heating oil was steady at $1.93. Natural gas for September delivery gained 4.1 cents to $3.68 per 1,000 cubic feet.

In London, Brent prices rose 16 cents to $73.66 a barrel on the ICE Futures exchange.

[Associated Press; By ALEX KENNEDY]

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