Oil rises 1%, heads for weekly gain in thin year-end trade

By Shariq Khan

NEW YORK (Reuters) -Oil rose about 1% on Friday and was set for a weekly gain in low trading volume ahead of year-end, backed by expectations of lower U.S. crude stockpiles and hopes of a stimulus-driven economic recovery in China.

Brent crude futures rose 62 cents, or 0.9%, to $73.88 per barrel by 11:09 a.m. EST (1611 GMT). U.S. West Texas Intermediate crude futures rose 70 cents, or 1%, to $70.32 per barrel.

On a weekly basis, both Brent and WTI crude are set to gain about 1.5%.

U.S. crude oil inventories fell by 3.2 million barrels in the week ended Dec. 20, market sources said on Tuesday, citing figures from the American Petroleum Institute. That is a bigger decline than the 1.9-million-barrel drawdown forecast by analysts in a Reuters poll. [API/S]

“Probably we are moving back up again in anticipation of a crude draw in the U.S.,” said UBS analyst Giovanni Staunovo. “Some support for oil might come soon from cold weather supporting demand.”

Official stockpile data from the U.S. Energy Information Administration is due at 1 p.m. ET on Friday, delayed from its usual Wednesday release due to the Christmas holiday. [EIA/S]

Tightening crude oil spreads and high U.S. refining activity indicate crude oil stockpiles should have drawn down last week, StoneX analyst Alex Hodes said.

Optimism over Chinese economic growth has also sparked hopes of higher demand next year from the top oil importing nation.

The World Bank on Thursday raised its forecast for Chinese economic growth in 2024 and 2025. Meanwhile, Chinese authorities have agreed to issue special treasury bonds worth 3 trillion yuan ($411 billion) next year, sources told Reuters this week, as Beijing acts to revive the sluggish economy.

(Reporting by Shariq Khan, Alex Lawler, Enes Tunagur and Sudarshan Varadhan; editing by David Goodman and Rod Nickel)