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Brent holds above $107

Thursday, July 17 09:46:55

Brent futures held above $107 a barrel on Thursday as a sharp drop in U.S. crude stockpiles and promising economic data from China indicated an improving outlook for demand in the world's top two oil consumers.

Continued worries about the geopolitical situation in North Africa, the Middle East and Ukraine also underpinned oil prices.

Brent for September, which became the front-month contract on Thursday, rose 39 cents to $107.54 by 0801 GMT. The August contract, which expired on Wednesday, dropped 17 cents to settle at $105.85 a barrel.

U.S. crude, which is particularly sensitive to domestic inventory data, climbed $1 to $102.20 a barrel before paring some gains but remained above $102.

Oil prices have been on the increase after a larger-than-expected drawdown in overall U.S. stockpiles and at the Cushing, Oklahoma delivery hub.

A rise in U.S. refining activity caused crude stocks to fall by 7.5 million barrels last week, the biggest draw since January and larger than the 2.1 million drawdown forecast by analysts, data from the U.S. Energy Information Administration (EIA) showed.

China posted slightly better-than-expected economic growth of 7.5 percent in the second quarter this year, government data issued on Wednesday showed.

Its implied oil demand rose to 10.2 million barrels per day (bpd) in June, the highest since January 2013, according to Reuters calculations based on preliminary government data.

But oil prices could trend lower in the absence of further market-moving data or political events, said Michael McCarthy, chief market strategist at Sydney's CMC Markets.

Oil prices have fallen since Brent hit a nine-month high of $115.71 on June 19 after Islamist insurgents took control of swathes of northern and eastern Iraq.

Fighting has continued, but initial fears that it would have a serious impact on the country's oil exports have eased. Iraq's southern oilfields are expected to export 2.6 million bpd in July, the same as May and the highest since 2003.

Investors are keeping an eye on geopolitical tensions for further trading cues, however.

In Libya, oil exports through its two largest eastern ports, capable of shipping 500,000 bpd, will not start before August, an official said on Wednesday. Exports from Brega have stopped due to a protest.

Russia is facing tougher sanctions from the United States and Europe over Ukraine, where 11 soldiers were killed on Wednesday as government forces battled pro-Russia separatists.

Rosneft, Russia's largest oil producer, was among the firms targeted by further U.S. sanctions announced on Wednesday while Europe agreed to impose its own package. (Reuters)

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