Oil hovers above $70 on mixed US economic signs

SINGAPORE (AP) - Oil prices hovered above $70 a barrel Wednesday in Asia as investors weighed mixed signals from the U.S. economy amid tumbling equity markets.

Benchmark crude for July delivery rose 10 cents to $70.57 a barrel by midday Singapore time in electronic trading on the New York Mercantile Exchange. On Tuesday, it fell 15 cents to settle at $70.47.

Oil prices this week have come off eight-month highs near $73 a barrel amid some signs that the U.S. economy - while past the worst of a severe recession - is still weak. The Federal Reserve said Tuesday that industrial production fell a larger-than-expected 1.1 percent in May.

After a rally of almost 40 percent since March 9, the Dow Jones industrial average has fallen 3.3 percent over the first two days of the week.

Meanwhile, the Commerce Department said home construction jumped in May by the largest amount in three months after hitting a record low in April.

"There have been some mixed signs," said Toby Hassall, an analyst with investment firm Commodity Warrants Australia in Sydney. "The last few days we've seen a turn toward negative sentiment. Oil looks set for a correction."

Crude traders have also been watching the dollar. A weakening dollar helped fuel a doubling of the oil price since March as investors often look to commodities such as crude as a hedge against inflation.

The euro gained to $1.3867 on Wednesday from $1.3813 on Tuesday.

"Oil will likely drift below $70 and maybe to $65." Hassall said. "It's been a very strong rally, driven by sentiment rather than data, which makes it look vulnerable to a correction."

In other Nymex trading, gasoline for July delivery fell 2.21 cents to $2.05 a gallon and heating oil was steady at $1.83. Natural gas for July delivery slid 2.8 cents to $4.10 per 1,000 cubic feet.

In London, Brent prices rose 7 cents to $70.31 a barrel on the ICE Futures exchange.