Oil prices ease in Asian trade

Oil prices eased in Asian trade on Tuesday on continuing concerns over global energy demand, dealers said.

New York's main oil futures contract, light sweet crude for July delivery, slipped 46 cents to 127.30 dollars per barrel.

The benchmark contract had closed at 127.76 dollars on Monday at the New York Mercantile Exchange.

Brent North Sea crude for July dropped 71 cents to 127.31 dollars per barrel, after settling at 128.02 dollars on Monday in London.

Tetsu Emori, fund manager at Astmax asset management in Tokyo, said concerns over falling demand for oil worldwide would continue to weigh on the market despite positive economic data from the US.

"In the near term, prices will find support at 115 dollars," he said.

Prices made a temporary rebound in later trade Monday after the publication of the Institute for Supply Management (ISM) index of manufacturing activity in the US.

The index rose to 49.6 in May, topping market expectations of a fall from 48.6 in April.

Although the reading still indicated reduced activity for the fourth straight month, it rose close to 50, above which readings indicate growth.

Crude oil has shed about eight dollars since striking record peaks of 135.14 dollars in London and 135.09 dollars in New York on May 22.

"The signs that demand is falling is forcing funds to seek better profits elsewhere," Alaron trader Phil Flynn said.

"Keep an eye on the 125 dollars a barrel area. A close below (that level) could open up the selling floodgates."

New York crude plunged five dollars last week, while London Brent shed about four dollars, in line with a recovering US currency that makes oil less affordable for foreign buyers and therefore dampens demand.

Despite the recent easing in prices, the high cost of crude has sparked widespread international alarm and US-led calls for the Organisation of the Petroleum Exporting Countries to produce more oil.

Benchmark crude prices burst through the 100-dollar level for the first time at the start of the year.

Opec president Chakib Khelil on Saturday reiterated the cartel's long-standing view that speculators and the weak dollar were partly to blame for runaway prices.

On Monday US Treasury Secretary Henry Paulson, touring the Gulf, called on oil-producing countries to open their oil markets to foreign investment.

"On the supply side, we are urging all oil producing countries to open oil markets to foreign investment, which would support faster and more efficient growth," he said in a speech in the oil-rich United Arab Emirates.