* Oil hits six-month high of $66.17
* Japan factory output jumps, stimulus boosts demand
* U.S. data shows 5.4-million-barrel crude stock fall
(Updates throughout)
By Christopher Johnson
LONDON, May 29 (Reuters) - 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 <CLc1> was up $1.09 at
$66.17 per barrel by 1040 GMT, its highest level since early
November last year.
London Brent crude <LCOc1> 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)."
U.S. STOCKS
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.
(For 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. []
(Additional reporting by Fayen Wong in Perth; editing by
Anthony Barker)
