Oil rose to a six-month high above $66 per barrel on Friday, on track for its largest monthly percentage gain in more than a decade, after Japanese and U.S. data suggested the economic downturn may be moderating.
Oil prices have jumped almost 30 percent this month, buoyed by expectations of a global economic recovery later this year and a bullish price outlook from key OPEC member Saudi Arabia. It is the largest monthly price rise since March 1999.
U.S. crude oil for July delivery was up $1.09 at $66.17 per barrel by 6:40 a.m. EDT, its highest level since early November last year.
London Brent crude gained 98 cents to $65.37.
Data on Friday showed Japanese industrial production rose 5.2 percent in April on a monthly basis, and the government said it expected continued gains through June.
Better U.S. durable goods orders figures on Thursday also reinforced the sense that the global economic slump might be abating, despite a disappointing U.S. home sales report and lingering concerns over mounting Western government debt.
The market has reacted to the headline figures, said Harry Tchilinguirian, analyst at BNP Paribas in London. That has helped extend technical buying as we moved above the psychologically important 200-day moving average (MA).
The front month for U.S. crude oil futures crossed up through its 200-day MA on its daily price chart on Tuesday and it is now acting as a strong support, according to technical analysts who track prices on charts.
Another supportive influence was U.S. crude oil stocks, which fell by 5.4 million barrels in the week to May 22, the U.S. Energy Information Administration said, way above analysts' expectations in a Reuters poll for a 700,000 barrel decline, as refiners ramped up output ahead of the summer driving season.
Gasoline inventories also dropped for the fifth week in a row as demand rose in the week preceding the Memorial Day holiday, which traditionally marks the start of the summer driving season in the U.S.
OPEC's decision to hold oil production steady also helped prop up prices.
The producer group on Thursday kept its output targets unchanged as the market had expected, betting on a strengthening world economy and tentative signs of increased demand.
Analysts said Saudi Arabia's rare forecast this week that oil prices could reach $75 a barrel later this year represented a policy shift from the world's largest oil producer, which has until recently hinted it would be happy with a lower price to help the world economy back on its feet.
Taken in this light, Saudi's statement clearly represents a policy shift from a priority on the economy to a view that higher prices are not something that Saudi Arabia will stand in the way of, JP Morgan analyst Lawrence Eagles said in a note.
Investors will be keeping a close watch on economic data due later, including U.S. first-quarter preliminary GDP figures and Reuters/University of Michigan May consumer sentiment.
(Additional reporting by Fayen Wong in Perth; editing by Anthony Barker)