Oil drops below $60, gives up early gains

By David Sheppard

LONDON (Reuters) - Oil reversed early gains and dropped below $60 a barrel on Thursday as a downturn in U.S. equities added to pressure from high U.S. oil inventories and persistent concerns about the timing of any economic recovery.

U.S. light crude for August delivery fell 45 cents to $59.69 a barrel by 1428 GMT -- on course for the seventh straight day of declines. London Brent crude eased 11 cents to $60.32 a barrel.

Earlier on Thursday, U.S. crude prices had rebounded as high as $61.62 after a 4 percent fall on Wednesday that meant oil was more than 15 percent lower so far in July.

Analysts said oil markets on Thursday were undermined when, after a bounce in European shares, U.S. equities turned lower shortly after the opening. The slide was given impetus by the breach of psychological support around the $60 a barrel mark.

"This morning's bounce served notice that the equity and currency markets remain as formidable price influences to the oil," said Jim Ritterbusch, President of Ritterbusch and Associates in Galena, Illinois.

"The crude, stock market and U.S. dollar are maintaining some correlation to reflect an expansion and contraction in risk appetite as additional economic input is received."

On Wednesday, bearish U.S. oil data highlighted how weak demand is in the world's largest energy consumer.

U.S. diesel and heating oil stocks have swelled to their highest level in almost 25 years after jumping by 3.7 million barrels last week, data from the Energy Information Administration (EIA) showed.