Oil gains 1% on hopes of firmer demand

May 16, 2024 9:06 PM EDT

FILE PHOTO: A Marathon Oil well site is seen, as oil and gas activity dips in the Eagle Ford Shale oil field due to the coronavirus disease (COVID-19) pandemic and the drop in demand for oil globally, in Texas, U.S., May 18, 2020. REUTERS/Jennifer Hiller/

By Nicole Jao

NEW YORK (Reuters) - Oil prices settled about 1% higher on Friday, with global benchmark Brent crude recording its first weekly gain in three weeks, after economic indicators from the world's top two oil consumers - China and the U.S. - bolstered hopes for higher demand.

Brent settled 71 cents higher, or 0.9%, at $83.98 a barrel. U.S. West Texas Intermediate crude (WTI) gained 83 cents, or 1.1%, to $80.06.

For the week, Brent gained about 1%, while WTI rose 2%.

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

The Chinese figures showed potential for demand construction and supported oil prices, said Bob Yawger, director of energy futures at Mizuho. However, government data showing a drop in China's annual refined output may have offset that support.

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

The U.S. oil rig count rose by one this week to 497, the first increase in four weeks, energy services firm Baker Hughes said.

Recent U.S. economic indicators 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.

"Consumer prices were not as bad as expected," said Tim Snyder, economist at Matador Economics. "It gave the U.S. a little bit of a boost."

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

Meanwhile, a fire started at Russia's Tuapse oil refinery overnight after a wave of Ukrainian drone attacks. The extent of the damage was unclear.

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.

Money managers raised their net long U.S. crude futures and options positions in the week to May 14, the U.S. Commodity Futures Trading Commission (CFTC) said.

(Reporting by Nicole Jao in New York, 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 Bill Berkrot and Marguerita Choy)

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