* Oil hits six-month high of $65.70
* Japan factory output jumps, stimulus boosts demand
* U.S. data shows surprise 5.4 million bbl crude stocks fall
(Updates prices, details, changes dateline, pvs PERTH)
LONDON, May 29 (Reuters) - Oil rose above $65 a 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 around 28 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.
U.S. crude oil for July delivery <CLc1> was up 20 cents at
$65.28 per barrel by 0726 GMT, after earlier hitting a six-month
high of $65.70.
The contract, which has risen about 5 percent this week,
settled up 2.6 percent at $65.08 on Thursday, the highest close
since early November.
London Brent crude <LCOc1> gained 20 cents to $64.59.
"The market seems to be focusing strongly on the bullish
sentiment and the brighter macro-economic outlook, but it's a
little doubtful whether the demand fundamentals can continue to
support oil prices at such levels," said David Moore, a
commodities analyst at the Commonwealth Bank of Australia.
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.
U.S. INVENTORIES
Another bright spot was U.S. crude oil stocks, which fell by
5.4 million barrels in the week to May 22, the U.S. Energy
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.
(For a list of stories on the OPEC meeting, click
[])
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. []
(Reporting by Christopher Johnson in London and Fayen Wong in
Perth; editing by Peter Blackburn)
