Brent holds above $107 on US crude draw, China data

Thu Jul 17, 2014 12:06am EDT

* U.S. crude stockpiles down 7.5 million barrels last week -EIA

* Cushing stocks dropped by 650,000 barrels last week -EIA

* Brent to climb to $108 a barrel by end of week -analyst

By Keith Wallis

SINGAPORE July 17 (Reuters) - Brent futures held above $107 a barrel on Thursday as a sharp drop in U.S. crude stockpiles and promising economic growth 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.

The Brent contract for September, which became the front-month contract on Thursday, rose 3 cents to $107.20 by 0356 GMT. The August contract, which expired on Wednesday, dropped 17 cents to settle at $105.85 a barrel.

U.S. crude for August delivery climbed 24 cents to $101.44, after closing up $1.24 in the previous session.

Oil prices rose in Asia following overnight gains after a larger-than-expected drawdown in overall U.S. stockpiles and at the Cushing, Oklahoma delivery hub, said Avtar Sandu, senior commodities manager at Singapore's Phillip Futures.

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, the U.S. Energy Information Administration (EIA) said in its weekly report.

"The economy in the U.S. is on track to grow. The Chinese economy increased a bit - the growth figures were slightly higher so some support for oil is coming in from the demand side," Sandu said.

China saw slightly better-than-expected economic growth of 7.5 percent in the second quarter this year, according to government data on Wednesday.

The country's implied oil demand rose to 10.2 million barrels per day in June, its highest level since January 2013, according to Reuters calculations based on preliminary government data.

"I don't expect oil to drop after this bounce," said Sandu, who forecast Brent would end the week around $108 and West Texas Intermediate would close the week around $102.

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

In Libya, oil exports through its two largest eastern ports, capable of exporting 500,000 barrels per day, will not start before August, an official said Wednesday.

Exports through Brega have stopped due to a protest by oil guards, while 20 aircraft were damaged by shelling at Libya's main airport in the worst fighting in the capital Tripoli in months as rival militia battled for control.

Russia is facing tougher sanctions from the U.S. and Europe over the situation in Ukraine where 11 soldiers were killed on Wednesday as government forces battled pro-Russian separatists in the east of the country.

Rosneft, Russia's largest oil producer, was among the firms targeted by further U.S. sanctions announced Wednesday at the same time as Europe agreed to impose its own package.

(Editing by Himani Sarkar)

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