Oil was steady above $67 a barrel on Tuesday, after falling the previous day to its lowest level in two weeks, amid persistent worries over the pace of the global economic rebound and revival in energy demand.

The market got some support from a bounce in equities but could see more downside after the release of weekly inventory data later from the American Petroleum Institute (API), and on Wednesday from the Energy Information Administration (EIA).

Key July housing data and producer prices due later will also shed light on the health of the US economy.

Further price support could come from the rapid growth of Hurricane Bill, the first of this year's season, which might disrupt Gulf of Mexico oil and gas production.

By 0230 GMT, US crude for September delivery was up 49 cents at $67.24 a barrel. It had settled 76 cents lower at $66.75 on Monday, off a two-week low of $65.23 earlier. London Brent crude for October was up 22 cents at $70.76.

'The tone is nervous, absolutely. The market is realising that a lot of the recent gains have been based on very loose fundamentals, being driven out of equity markets, and that is vulnerable to a correction,' said Mark Pervan, senior commodity strategist at ANZ in Melbourne.

Oil suffered its sharpest decline in two weeks last Friday after the Reuters/University of Michigan Survey of Consumers showed consumer confidence in early August dropped to the lowest level since March, casting doubts over the pace of recovery in the world's top energy consumer.

US stocks suffered their worst loss in seven weeks on Monday as weak data from Japan and a disappointing outlook from retailer Lowe's Cos dampened hopes about the economy's growth.

The US dollar and the yen both retained broad gains on Tuesday as uncertainty over the strength of a global economic recovery saw investors cut exposure to riskier assets and higher-yielding currencies.

The release of weekly API data at 2030 GMT later could show US crude stockpiles rising for the fourth straight week by 1 million barrels, as higher imports offset a slight rise in refinery activity, according to a Reuters poll of analysts.

Distillate stocks were seen up 400,000 barrels and gasoline stocks down 1.4 million barrels.

The US Commerce Dept will unveil July housing starts and permits at 1230 GMT. Economists polled by Reuters forecast a rise to a 600,000 annualised rate from 582,000 in June, and a total of 580,000 building permits compared with 570,000 the prior month.

The Labor Department will also release the July Producer Price Index (PPI) at the same time. Economists forecast a 0.3 per cent fall in prices compared with a 1.8 percent increase the prior month.

Hurricane Bill, the first hurricane of the 2009 Atlantic season, is expected to strengthen to a major category 3 storm by Wednesday, while the remnants of Tropical Storm Ana dissipated without threatening the US Gulf oil patch, the US National Hurricane Center said.

Energy markets are jittery over Gulf storms because the region produces a quarter of U.S oil and 15 percent of its natural gas.

'Certainly, news of hurricane activity will support prices. We see a trading range of $63-$70 for oil this week,' Pervan added. – Reuters