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Oil heads for weekly gain on hopes of firmer demand

Oil prices stabilised on Friday, with global benchmark Brent heading for its first weekly gain in three weeks, as economic indicators from big consumers China and the United States bolstered hopes for higher demand.

Brent crude oil was up 1 cent, or 0.01%, at $83.28 a barrel by 1324 GMT. U.S. West Texas Intermediate (WTI) crude gained 5 cents, or 0.06%, to $79.28.

Brent is on track for an increase of about 0.6% from last Friday, with WTI on course for a 1.3% gain.

China’s industrial output rose 6.7% year-on-year in April as a recovery in its manufacturing sector gathered pace, accelerating from 4.5% in March and pointing to possibly stronger demand to come. China also announced major steps to stabilise its crisis-hit property sector.

Tamas Varga of oil broker PVM said that while the Chinese figures and another attack on Russian oil infrastructure were boosting prices, oil had yet to make a convincing recovery from its recent slump.

“The lack of explicit enthusiasm is probably the function of tepid product demand depressing refining margins,” he said.

Authorities managed to contain a fire that started at Russia’s Tuapse oil refinery after a Ukrainian drone attack, officials in the Krasnodar region said.

Declines in oil and refined product inventories at global trading hubs have also created optimism over demand, reversing a trend of rising stockpiles that had weighed heavily on crude oil prices in previous weeks.

OANDA senior market analyst Kelvin Wong cited “several encouraging factors”, including two consecutive weeks of decline in U.S. crude stockpiles and expectations of more economic stimulus measures from China.

Recent economic indicators from the United States have fed into the optimism over global demand for oil. U.S. consumer prices rose less than expected in April, data showed on Wednesday, boosting expectations of lower interest rates.

Lower U.S. interest rates could help soften the dollar, which would make oil cheaper for investors holding other currencies.

On the supply side, investors were mostly looking for direction from the upcoming OPEC+ meeting on June 1.

“With the price of Brent crude hovering below $90, a level quietly being targeted by Saudi Arabia and others, the upcoming OPEC+ meeting is likely to result in a rollover of current production cuts,” Saxo Bank analyst Ole Hansen said in a note.
Source: Reuters (Reporting by Robert Harvey and Alex Lawler in London, Additional reporting by Deep Vakil in Bengaluru, Shariq Khan in New York and Trixie Yap in Singapore Editing by David Goodman and Susan Fenton)

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