Oil falls toward $77 on double-dip recession fear

Oil prices fell by more than 2% on Tuesday, reversing an earlier rally, after data showed U.S. consumer confidence plunged to the lowest level in five months, prompting investors to sell off riskier assets including oil and equities.
The data prompted U.S. benchmark oil prices to back down sharply from a new 11-week high of $79.69 a barrel earlier Tuesday, falling by $1.65 a barrel to $77.33 by 12:04 p.m. EDT (1404 GMT).
U.S. stocks gave up short-lived gains, and the U.S. dollar firmed against a basket of foreign currencies, an indication investors were piling into safe havens, such as Treasury bonds.
Oil fell "on a technical reaction to not being able to hold near $80 a barrel. We turned lower this morning on the bad consumer confidence number, which also hit equities," said Addison Armstrong of Tradition Energy in Stamford, Connecticut.
ICE Brent fell $1.63 to $75.87 a barrel by the same time.
Rising oil production capacity in the Gulf of Mexico after Tropical Storm Bonnie fizzled over the weekend without damaging infrastructure also weighed on oil prices, analysts said.
As of Monday, offshore producers in the U.S. portion of the Gulf of Mexico were still idling around 27% of the region's oil output following the uneventful passage of Bonnie, following platform evacuations.
As oil prices fall below $80, "a further drop cannot be ruled out as people will point to a double-dip recession and a Chinese (demand) slowdown," said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.
Oil prices have been testing a potential run over $80 a barrel after trading in the $70 to $80 range since early June, analysts said.
Some technical analysts, who study price charts for clues to future direction, think oil prices could still break through $80 a barrel following a breach of the key 200-day moving average level last week.
Prices also fell on Tuesday as analysts expected data to show that oil product stocks rose in the United States last week, in spite of an expected dip in crude stocks.