Oil edges off highs

Crude prices rebound on stock rally to recover most of earlier losses.

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By Julianne Pepitone, CNNMoney.com contributing writer

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NEW YORK (CNNMoney.com) -- Oil prices slipped slightly Tuesday, backing away from a 7-month high, but rebounding from a steeper selloff after stocks rallied on strong economic data.

Light, sweet crude for July delivery fell 3 cents to settle at $68.55 a barrel Tuesday. Prices reached as low as $67.50 a barrel earlier in the session as investors expressed concern about the economy ahead of the day's reports.

But crude prices bounced back after positive home sales data sent stocks higher and added to optimism about a recovery. Oil investors use stocks as a bellwether for the economy, and a stronger economy demands more energy.

After the home sales report, stocks held near multi-month highs on Tuesday afternoon, with the Dow Jones industrial average (INDU) adding 0.6%, after a positive housing report fueled optimism. The index briefly turned positive for the year for the first time since Jan. 7.

On Monday, crude settled at its highest level since Nov. 4, when it ended at $70.53 a barrel.

Inventory outlook: The Energy Information Administration will release its daily supply report Wednesday.

A consensus estimate of industry analysts surveyed by energy information provider Platts predicts crude stockpiles fell by 2 million barrels last week, while gasoline supplies fell by 1.5 million barrels.

Supplies of distillates, which are used to make heating oil and diesel, are expected to have increased by 950,000.

Gasoline: Prices at the pump have increased for 35 consecutive days as the peak summer driving season approaches.

The national average price for a gallon of regular unleaded gasoline increased to $2.525, up from the previous day's price of $2.512, according to according to motorist group AAA.

In the last 35 days the average price of gas has increased 47.7 cents, or 22.6%. But the surge in prices is relatively tame compared with last summer's highs. Average gas prices now are down $1.58, or 38.6%, from the record-high price of $4.114 that AAA reported on July 17, 2008. To top of page

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