LONDON: Oil hit a two-week high above $75 on Friday, heading for its first weekly gain in almost a month on rallying stock markets and expectations of rising US oil consumption.
Oil prices have risen more than 7 percent this week with official data showing soaring fuel demand in top consumer the United States and China saying Europe remains a key investment market for its foreign-exchange reserves.
Asian stocks rallied for a third day on Friday, with Japan’s benchmark Nikkei rising more than 1.7 percent to its highest this week and the FTSEurofirst 300 index of top European shares up 0.3 percent in early trade.
US crude futures for July delivery jumped to a high of $75.72, up $1.17 per barrel, before easing back to $75.17 by 1117 GMT. ICE Brent was up 61 cents at $75.27.
Oil prices have been extremely volatile over the last three weeks. US crude hit an intra-day low of $64.24 on May 20 ahead of the expiry of the June futures contract, almost $23 below its peak at $87.15 on May 3, its level highest for 19 months.
"We don’t think we’re far from the bottom," Marco Dunand, president and chief executive of Mercuria Energy Trading told the Reuters Global Energy Summit, adding "certain countries need a $65-$70 kind of floor."
But some analysts were cautious in the short term.
"We would rather watch the action from the sidelines for at least another few days to see whether the current bounce is being led by a change of perceptions, or is merely another ill-fated short-covering rally," said Edward Meir, senior analyst at brokers MF Global.
Traders are keeping an eye on forecasts for the Atlantic hurricane season that have revived concerns of disruption to supplies in the Gulf of Mexico, where BP’s attempt to plug a gushing oil well continued.
In its first outlook for the hurricane season that begins in June, the US National Oceanic and Atmospheric Administration forecast 14 to 23 named storms, with eight to 14 turning into hurricanes, nearly matching 2005’s record of 15.
Hurricanes Katrina and Rita devastated offshore oilfields and refineries across Louisiana and Texas in 2005, causing the most severe disruption to US supplies from a natural disaster.
The US driving season, when motor fuel demand traditionally reaches its annual peak, starts this weekend with the US Memorial Day holiday, running until early September.
US diesel demand for trucking and industry is rising, a weekly government report showed on Wednesday.
Oil demand in the US climbed almost 7 percent over the past four weeks, the Energy Information Administration said, led by a 16 percent jump in demand for distillates, a category that includes diesel and heating oil.
The US economy grew at a slightly slower pace than previously estimated in the first quarter but the recovery still appeared solid, suggesting the economy could withstand fallout from the European debt crisis.
Industry data provider Genscape on Thursday said crude inventories at the US pricing point of Cushing, Oklahoma hit another record high in the week to May 25, rising 478,000 barrels to 39.9 million barrels, from a week earlier. –Additional reporting by Alejandro Barbajosa in Singapore