Oil prices topped $76 per barrel on Friday on demand optimism, posting the biggest weekly increase since late May after a choppy low volume trading session. US crude for August settled up 65 cents or 0.86 percent to $76.09 per barrel in a volatile session, closing the week with a 5.5 percent gain - the biggest weekly jump since the week to May 28.
"Prices are rising here on thin volume and shorts have been covering ahead of the weekend," said Gene McGillian and analyst with Tradition Energy in Stamford, Connecticut. "Right now the question is, with prices above $75, is there enough conviction among people with long positions to add to their exposure?" Prices jumped as much as $1 to $76.48, the highest intra-day price since June 30, slipping in and out of negative territory before settling up.
Trading volumes for the front-month contract were at their lowest levels since early last week. US equities markets closed up as investors eyed corporate earnings season that unofficially kicks off on Mondays. The S&P 500 index closed up 0.72 percent while the Dow Jones Industrial average rose 0.58 percent, helping the principal US stock indices post an increase of more 5 percent for the week - their best week in a year.
Investors often see rising equities markets as a sign of economic growth, which generally spurs demand for oil. "Oil market fundamentals remain positive with demand for crude barrels intensifying as refiners ramp up throughput to meet peak summer demand," said Lawrence Eagles, a J.P. Morgan analyst. "However, the broader macroeconomic picture continues to have a strong influence on oil prices which have traded in a strong correlation to equity markets due to slowing economic momentum."
US crude was still below a 19-month peak above $87 reached in early May, having rebounded sharply from a trough below $65 on May 20. Crude inventories in the United States dropped 5 million barrels last week, more than twice as much as expected, the Energy Information Administration said.
Markets awaited Chinese trade data, to be published on Saturday, for further price direction. Year-on-year import and export growth probably slowed last month from the sizzling pace set in May, in large part reflecting a higher base of comparison as the global recovery gained strength around the middle of last year.
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