By Polya Lesova & Moming Zhou, MarketWatch
NEW YORK (MarketWatch) -- Oil futures fell on Tuesday, as traders reassessed the previous session's gains ahead of a U.S. economic report on factory orders and the latest data on U.S. petroleum stockpiles.
Hesitations in global equity markets, which fueled safe-haven demand for the dollar, also weighed on commodities.
Crude oil for December delivery fell 58 cents, or 0.8%, to $77.55 a barrel in electronic trading on Globex.
"Oil is overpriced at the moment. We expect it to fall back to below $70 a barrel. That's based on all the fundamental factors," said David Wech, head of research at JBC Energy GmbH in Vienna.
"It's difficult to imagine a market that's [fundamentally] weaker than the oil market is at the moment," Wech said. "The spare capacity in the system is so big that the problems will not be solved in the next year."
Energy traders will receive another update on petroleum inventories this week, though Wech warned that weekly inventory data cannot change the overall market situation.
The American Petroleum Institute will release its supply report on Tuesday afternoon. A more closely watched report from the Energy Information Administration is due on Wednesday morning.
Analysts surveyed by Platts expect an increase of 1.3 million barrels in crude inventories during the week ended Oct. 30. They also project a rise of 800,000 barrels in gasoline stocks as well as a decline of 1 million barrels in distillates stocks.
U.S. stock futures were pointing south on Tuesday, with weaker European markets and a rate hike from Australia setting the stage for a potentially bumpy session.
The Federal Open Market Committee begins its two-day meeting on Tuesday. Data is also due at 10 a.m. Eastern on U.S. factory orders for September.
In the currency markets, the dollar was higher against its major rivals, weighing on dollar-denominated crude prices.
The dollar index (DXY 76.61, +0.32, +0.42%) , which tracks the performance of the greenback against a basket of other major currencies, rose 0.7% to 76.782.
Crude futures gained 1.5% to end above $78 a barrel on Monday, as upbeat manufacturing reports from the U.S, China and Europe lifted expectations of a global economic recovery.
"The oil market should over time be able to detach itself from the economic picture," Wech said. "The status of the economy has an impact on the oil industry, but it's not as big as [oil] price developments over the last year would indicate."
Also on Globex, December reformulated gasoline fell 2.03 cents, or 1%, to $1.9706 a gallon and December heating oil dropped 2.15 cents, or 1.1%, to $2.0245 a gallon.
December natural gas lost 5.4 cents, or 1.1%, to $4.771 per million British thermal units.
