Oil rose toward $76 a barrel on Friday, heading for its biggest weekly gain since May, after a drop in U.S. inventories and positive economic indicators lifted risk appetite and sentiment across markets.

European stocks were up following a rally in Asia, and the euro held near a two-month high, following a fall in U.S. jobless claims and an upbeat view of the euro zone's recovery from the European Central Bank.

The main driver is still financial markets -- the stock market and the weaker U.S. dollar are the main reasons why oil prices have had a positive week this week, said Carsten Fritsch, analyst at Commerzbank.

Additional support came from U.S. inventory data showing a large decline in crude stocks.

U.S. crude for August rose 33 cents to $75.77 a barrel by 1010 GMT (5:10 a.m. EDT), after touching an intraday peak of $76 on Thursday, the highest price this month. ICE Brent gained 36 cents to $75.07.

A stronger U.S. economy would bolster crude consumption. U.S. crude inventories dropped 5 million barrels last week, more than twice as much as expected, the Energy Information Administration said.

Oil was headed for a 5.2 percent increase this week, its fourth-biggest weekly gain of the year.

U.S. crude was still well below a 19-month peak above $87 reached in early May, having rebounded sharply from a trough below $65 on May 20.

Wall Street staged a late-day surge on Thursday, extending a rally to three days on data showing U.S. first-time jobless claims fell to their lowest in two months, and after a handful of large retailers reported solid sales.

The oil market awaits Chinese trade data, to be published on Saturday, for further price direction.

Year-on-year import and export growth probably slowed last month from the sizzling pace set in May, in large part reflecting a higher base of comparison as the global recovery gained strength around the middle of last year.

(Additional reporting by Alejandro Barbajosa; Editing by Sue Thomas)