* IEA monthly report sees 2010 demand acceleration
* $70 a barrel is key support level for now
* High U.S. stocks and contango could temper gains
(Recasts, adds IEA report, previous SINGAPORE)
By Emma Farge
LONDON, Dec 11 (Reuters) - Oil rose on Friday as forecasts
for higher demand growth next year and strong Chinese industrial
output boosted sentiment, ending a seven-day losing streak which
saw prices dip below $70 a barrel for the first time in two
months.
U.S. crude for January delivery <CLc1> edged up 52 cents to
$71.06 a barrel by 1107 GMT, after touching a session low of
$69.81 a barrel on Thursday. Over the past seven trading days,
front month crude has sunk almost $7 or 10 percent.
Brent crude futures <LC0c1> rose 55 cents to $72.41 a
barrel.
World oil demand will rise by almost 1.5 million barrels per
day (bpd) in 2010 to 86.3 million bpd and the rate of demand
growth will also accelerate, the International Energy Agency
(IEA), which advises 28 industrialised nations, said on Friday.
[]
"Oil demand looks a bit stronger," said David Fyfe, head of
the oil industry and markets division of the IEA. "Looking at
2010, it is an adjustment in a bullish direction."
The report came after the U.S. Energy Information
Administration revised its own world oil demand for 2009 lower
on Tuesday []
Strong industrial growth figures out of China also helped to
reverse this week's price slump.
China's November industrial output surged to its strongest
since June 2007, underscoring the economy's robust recovery from
the global downturn, and analysts expected the trend to continue
in coming months. []
Refining rates in the world's second largest oil user also
posted a record high in November, up 21 percent from a year
earlier to 8.12 million bpd, signalling recovering demand.
[]
"The IEA shows demand is slightly up and the Chinese data
has been positive. Prices are likely to stabilise around these
levels," said Olivier Jakob of Petromatrix, adding $70 a barrel
was set to be a key technical support level moving forward.
OVERSUPPLY
Analysts however cautioned the supply concerns that drove
prices lower this week were likely to hold sway over the market
and could temper any future rallies.
Earlier this week, the EIA reported stocks at the U.S.
delivery hub of Cushing in Oklahoma rose 2.5 million barrels to
33.4 million barrels. []
This inventory overhang has depressed front month U.S. crude
prices relative to oil futures, resulting this week in the
widest WTI crude market contango since August of more than $2 a
barrel.
For graphic showing steepening of the forward curve, click:
http://graphics.thomsonreuters.com/129/CMD_NYOIL1209.gif
"There is a strong message in the oil market and that is
weakness. The contango is widening significantly and this points
to physical oversupply," said analyst David Wech at JBC Energy,
referring to both inventories on land and in floating storage.
The volume of refined oil products stored on ships floating
in the sea increased to 98 million barrels at the end of
November, the IEA said on Friday. []
Data out of the United States later is likely to provide
further direction as traders look for clues about the pace of
demand recovery in the world's largest oil consumer.
U.S. retail sales for November are due at 1330 GMT and
preliminary December consumer confidence figures at 1455 GMT.
These data will also be important drivers for the U.S.
dollar and this could in turn steer oil, analysts said.
Weakness in the U.S. dollar has been a factor behind this
year's oil price rally from below $40 a barrel last December.
A cheap dollar tends to drive oil higher as it makes it more
attractive for buyers using other currencies.
(Editing by James Jukwey)
