Oil prices rose on Friday and are on track for the second straight weekly gain in a row as resilient demand led to a larger-than-expected drop in US oil inventories and offset fears of higher US interest rates.
Brent crude futures rose 45 cents, or 0.6%, to $76.97 a barrel at 0615 GMT, while West Texas Intermediate (WTI) crude rose 44 cents, again 0.6%, to $72.24 a barrel.
Both benchmarks are on their way to gaining around 2% for the second week in a row.
The crude demand outlook is starting to look better when the US enters peak summer travel season, as well as the Saudis became able to raise prices in Europe and Asia.
The Energy Information Administration (EIA) said on Thursday that US crude inventories fell more than expected amid strong refinery demand, while gasoline inventories fell sharply last week, driven by increased travel.
These moves come after the biggest oil exporters, Saudi Arabia and Russia, announced a new round of production cuts for August. Total cuts are now over five million barrels per day, equivalent to 5% of global oil production.
However, the increases in oil prices were limited by the strengthening expectations that the US central bank will raise interest rates at its meeting on July 25-26 after keeping interest rates unchanged at 5-5.25% in June.
The number of Americans filing for new unemployment benefits rose modestly last week, while private employment payrolls rose in June, raising the possibility of a Federal Reserve rate hike this month, data released on Thursday showed.
Sources close to OPEC said that when OPEC releases its first outlook later this month, it will maintain its optimistic view of oil demand growth for next year, predicting a slowdown but still an above-average increase from this year.
Higher interest rates increase borrowing costs for businesses and consumers, which can slow economic growth and reduce oil demand. Investors will look for clues on interest rate paths from US and Chinese inflation data next week.
Oil has found a floor this week and therefore, it looks like it could rise even higher as long as global recession fears remain calm.
