Oil up 1 percent on tightening crude supply, upbeat economic data

By Laila Kearney and Devika Krishna Kumar

NEW YORK (Reuters) - Oil prices rose 1 percent on Friday as involuntary supply cuts from Venezuela and Iran plus conflict in Libya supported perceptions of a tightening crude market, while upbeat Chinese economic data eased concerns about waning crude demand.

The oil market also followed global stock markets higher after strong earnings at JPMorgan Chase & Co. The dollar index slipped to its lowest against the euro in more than two weeks, making crude cheaper for non-U.S. buyers.

"Equities are getting off to a good start with earnings season and the dollar index being weaker helps reaffirm confidence in the oil market," said Phil Streible, senior commodities strategist at RJO Futures in Chicago.

Brent crude oil futures rallied 99 cents, or 1.4 percent, to $71.82 a barrel by 2:05 p.m. EDT (1805 GMT).

U.S. West Texas Intermediate (WTI) crude futures rose 66 cents, or 1 percent, to $64.24 a barrel.

Both benchmarks were on track for a weekly gain of about 2 percent, which would be Brent's third consecutive week of gains, and the sixth straight rise for WTI.

Oil markets have been lifted by more than 30 percent this year by supply cuts led by the Organization of the Petroleum Exporting Countries and U.S. sanctions on oil exporters Iran and Venezuela, plus escalating conflict in OPEC member Libya.

"Geopolitically infused rallies could shoot prices toward or even past the $80 per barrel mark for intermittent periods this summer," RBC Capital Markets said in a note.

The head of Libya's National Oil Corporation warned on Friday that renewed fighting could wipe out crude production in the country.

Bombing by a warplane occurred on Friday near the Mellitah oil and gas plant, jointly operated by Italy's ENI and Libyan state oil firm NOC, a Libyan National Army (LNA) military source and residents said. The plant supplies Italy with gas through the Greenstream pipeline.

OPEC and its allies meet in June to decide whether to continue withholding supply. Though OPEC's de facto leader, Saudi Arabia, is considered keen to keep cutting, sources within the group said it could raise output from July if disruptions continue elsewhere.

The producer group's supply cuts have been aimed largely at offsetting record crude production in the United States.

U.S. energy companies this week increased the number of oil rigs operating for a second week in a row, bringing the total count to 833, General Electric Co's Baker Hughes energy services firm said in its closely followed report on Friday. [RIG/U]

The rig count fell for the past four months as independent exploration and production companies cut spending on new drilling to focus on earnings growth instead of increased output.

On the demand side, Chinese data showed exports rebounded last month, driving U.S. and euro zone bond yields to three-week highs and helping offset weaker imports and reports of another cut in German growth forecasts.

"While macro fears of an economic hard landing may be overblown, the concentration risk of global oil demand (in Asia) remains underappreciated," RBC Capital Markets said.

(Additional reporting by Henning Gloystein in Singapore; Editing by David Goodman and Steve Orlofsky)