By Claudia Assis and Polya Lesova , MarketWatch SAN FRANCISCO (MarketWatch) -- Crude-oil futures held around $78 a barrel Tuesday, fluctuating in early trading as investors weighed negative sentiment following the downgrade of a major French bank, a warning about mounting losses at Spanish lenders, and a surprise drop in the resale of homes in the U.S. Crude for August delivery lost 41 cents to $78.10 a barrel on the New York Mercantile Exchange. The contract earlier hit an intraday high of $78.77 a barrel. "There was over-excitement at the beginning of the week," said Matt Smith, commodities analyst at Louisville, Ky.-based Summit Energy, referring to euphoria following China's decision over the weekend to allow its currency to float more freely against the dollar. "We're stalling right now" with some floor for prices around $76 a barrel, he added. Oil deepened its losses after a report on existing home sales showed an unexpected 2.2% decline in May. Economists polled by MarketWatch had expected a rise around 6%, on the thought that buyers would rush to take advantage of a tax break expiring this month. Traders also had to contend with a rising dollar on Tuesday. The "weaker euro again has put pressure on oil prices," wrote analysts at Commerzbank in a note to clients Tuesday. The dollar index (DXY 85.82, -0.11, -0.13%) , which measures the U.S. unit against a basket of six currencies, rose 0.2% to 86.06, but the greenback made gains against the euro. See more about the foreign-exchange action centered on European and U.K. banks. Traders appeared to be shrugging off the decision by Russia's Gazprom to begin reducing deliveries of natural gas to Belarus after the nation failed to pay its debt. Gazprom cut supplies by 15% on Monday and then by 30% starting on Tuesday, the Associated Press reported. "Normally, concerns about secure supply on the back of such conflicts support prices, especially as some of the oil pipelines run through these regions," the Commerzbank analysts said. "This shows once again that the situation on the oil market is being determined mainly by the general financial market environment," they added. The Stoxx Europe 600 index (ST:SXXP 256.92, -1.26, -0.49%) dropped 1.1% on Tuesday, coming under pressure after Fitch Ratings lowered its rating on BNP Paribas (FR:BNP 49.36, -0.97, -1.92%) and after Standard & Poor's said it now expected Spanish banks to suffer higher credit losses than previously estimated. Stocks opened higher on Wall Street, although lackluster data on sales of existing homes chased some equity investors to the sidelines. See Market Snapshot. Prices ended modestly higher on Monday, surrendering some gains after having rallied earlier on China's yuan move. Supply data ahead Energy traders await data on petroleum inventories due at 4:30 p.m. Eastern from the American Petroleum Institute. The government's Energy Information Administration will release its own data on weekly stockpiles at 10:30 a.m. on Wednesday. Analysts polled by Platts expected a decline of 1.5 million barrels in crude stocks and a drop of 500,000 barrels in gasoline supplies. They also project an increase of 1.4 million barrels in distillate supplies. Refinery utilization, or the so-called run rate, is expected to rise 0.5 percentage point to stand at 88.4%. "With refinery runs expected to rise and the narrowing in the front of the New York Mercantile Exchange futures contracts price curve discouraging any additional stock-building, crude inventories are apt to partially offset last week's 1.7-million-barrel build," said Linda Rafield, senior oil analyst at Platts, in a statement.

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