Oil reversed losses on Thursday, rebounding towards $75 as confirmation of strong Chinese overall exports in May outweighed weaker demand readings in top consumer the United States.
China's exports rose 48.5 percent in May from a year earlier, beating forecasts of a 32 per cent gain and confirming a Reuters report on Wednesday on the export figure which helped send oil up more than 3 per cent the previous day.
US crude for July rose as much as 35 cents to $74.73 a barrel and was up 14 cents at $74.52 a barrel at 0532 GMT, after trading as low as $73.72 before the exports data came out.
ICE Brent gained 2 cents to $74.29.
China will release May industrial production data on Friday, forecast at 17.1 per cent in a Reuters survey, down from a 17.8 per cent gain in April. As in the case of exports, investors will look for evidence that the economy of the world's second-largest oil user keeps roaring ahead.
"If we continue to see a follow through in the data tomorrow, that will be the litmus paper test to show that China is with us and that growth remains robust," said Jonathan Barratt, managing director at Commodity Broking Services in Sydney.
Asian stocks extended gains on Thursday on China's strong export data, which investors hope will ease fears about a slowdown in Europe.
Still, some economists questioned whether China's momentum could be sustained given debt problems in Europe, the country's biggest overseas market.
China May Increase Oil Imports
But several said it would revive the debate about the timing of a long-awaited resumption in the appreciation of the Chinese currency, which if it happened would boost China's purchasing power for dollar-denominated oil.
China's May crude oil imports rose 4.3 per cent from a year ago, but were sharply off the record high hit in April.
U.S. crude has recovered almost $10 from below $65 on May 20, but is still down 15 per cent from a 19-month peak on May 3.
"The risk is to the topside," Barratt said. "Europe remains sluggish, but the market has decided that it has been taken care of. There are contingency plans."
Finance ministers from the debt-stricken eurozone sought to restore financial market confidence earlier this week by agreeing how to deploy a vast anti-contagion programme if needed by struggling members.
US crude inventories last week dropped a larger-than-expected 1.8 million barrels, the Energy Information Administration (EIA) said on Wednesday.
That was the same amount by which stockpiles of distillates including heating oil and diesel increased as distillate demand slowed, showing a gain of 9.3 per cent in the four weeks ended June 4, compared to 17 per cent in the four weeks to May 28.
US gasoline supplies were little changed last week, the EIA said.
"Refiners ran more crude, which was bullish," said Mike Wittner, head of oil research at Societe Generale in London, in a note to clients.
"However, this put downward pressure on an already well supplied distillate market. Weekly distillate demand ran out of steam and couldn't absorb the growing supply."