Oil prices bounce on China stock rebound, strong economic data

Oil glut, however, continues to weigh on prices

Crude oil prices bounced on Thursday on strong economic data from Japan and Germany, and as Chinese stocks picked up after the government launched new steps to stop a rout in its share markets.

Front-month US crude futures were up 91 cents at $52.56 per barrel at 0616 GMT, but remain almost 7.5 per cent lower than the end of last week.

Brent crude was around 80 cents higher at $57.84 a barrel, though still 4 per cent below last Friday.

Chinese stocks rallied on Thursday after the securities regulator banned shareholders with large stakes in listed firms from selling, in Beijing's most drastic step yet to stem a sell-off that has roiled global financial markets.

The police are also investigating clues pointing to potentially 'malicious' short-selling of Chinese shares, state news agency Xinhua said on Thursday.

Demand for oil was also supported by the return from maintenance of a 120,000-barrels per day crude distillation unit in Japan, where machinery orders hit a 7-year high in May.

German exports rose at their fastest pace this year in May, boosting expectations that Europe's largest economy will pull off stronger growth in the second quarter after expanding modestly in the first.

But analysts said the oil market remained under pressure and that big gains were unlikely.

"Oil is being pressured on multiple fronts, and China's equity wobble, the prospect of Iran's re-entry to the market and low liquidity all add up to an extremely fraught environment.

"Oil needs to establish a new range and we would see the WTI crude low around $50 with the upside capped at $58," Ole Hansen, head of commodity strategy at Saxo Bank, said in a note.

A surprise increase in U.S. stockpiles despite the peak demand American summer driving season added to global oversupply as the Organization of the Petroleum Exporting Countries and Russia produce at near record levels.

Iranian exports could also resume at full throttle if major global powers and Iran find a compromise in nuclear talks this week that could lead to a lifting of western sanctions against Tehran.

Image: An investor watches an electronic board showing stock information at a brokerage office in Beijing, China, July 9, 2015. Photograph: Kim Kyung-Hoon/Reuters