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Oil prices bounce on Nigeria attacks, but weekly decline in prospect

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Reuters LONDON

By Libby George

LONDON (Reuters) - Crude prices bounced back on Friday from two-month lows hit in the previous session, but benchmark Brent was on course for its largest weekly decline since January as economic worries weighed on oil.

Prices have gyrated as a glut of refined products and slowing economic growth contrasted with supply disruptions and expectations that the world's overhang of crude would soon begin to recede.

Brent crude futures were trading at $46.89 per barrel at 1339 GMT, up 49 cents from their previous settlement. U.S. crude was up 52 cents at $45.66 a barrel.

Still, Brent and U.S. crude were heading for weekly losses of nearly 7 percent, the deepest decline for the former since January.

 

"It could well be that a down cycle on oil's own fundamentals is now starting," JBC analysts said in a note.

However, prices rose on Friday as Nigerian militants launched fresh attacks on oil installations in the country's oil-rich Delta region.

The Niger Delta Avengers militants claimed an attack on the Nembe Creek Trunk Line, which carries Bonny Light crude exports to port, while attackers also blew up an oil pipeline operated by a subsidiary of Italy's Eni.

Data showing a rapid acceleration in U.S. job growth in June also helped underpin prices, as it eased some concerns over economic weakness.

But even before the attacks and jobs data, prices had been regaining some of the ground lost during the previous day's 5 percent drop on news that a U.S. weekly crude draw was lower than many analysts had expected.

Some said the price fall had been an overreaction because crude stocks had dropped for almost two months straight and U.S. production had fallen by 12.3 percent since 2015 peaks.

"Declining U.S. production is contributing hugely to the tightening of global supply, which is reduced in any case because of high production outages in OPEC countries," Commerzbank analyst Carsten Fritsch said.

Still, the outlook appeared volatile. Tanks are filled with oil products while economic worries have created concern over demand growth.

Data on Friday showed that German exports in May suffered their steepest monthly decline for nine months in a further sign that weak global demand is curbing growth in Europe's largest economy.

"While we are bullish for next year, we continue to be cautious for the rest of this year," Societe Generale oil analyst Michael Wittner said.

"For the time being, the path of least resistance for oil prices is lower."

(Additional reporting by Henning Gloystein in Singapore; Editing by David Goodman and Keith Weir)

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First Published: Jul 08 2016 | 7:27 PM IST

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