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Oil price up on U.S. stock draws, demand outlook

A man fills up his car at a petrol station in Rome January 6, 2015. REUTERS/Max Rossi
A man fills up his car at a petrol station in Rome January 6, 2015. REUTERS/Max Rossi

By Libby George and Lisa Barrington

LONDON (Reuters) - Oil prices rose on Thursday as lower U.S. crude stocks and optimistic global demand projections overrode concerns about a glut of supply.

U.S. stockpiles of crude and gasoline fell last week, data from the Energy Information Administration (EIA) showed on Wednesday, bolstering sentiment in the U.S. market.

Benchmark North Sea Brent crude oil was up 60 cents at $50.26 a barrel by 0855 GMT. U.S. crude was trading at $43.50 per barrel, up 20 cents.

Traders said a slide in the value of the dollar against a basket of currencies this week also helped strengthen oil markets. The U.S. currency rallied on Thursday but reached a one-month low on Wednesday.

A weaker dollar makes oil more affordable to holders of other currencies and tends to support commodity prices.

"It matches very well with the U.S. dollar curve," Bjarne Schieldrop, chief commodities analyst with SEB in Oslo, said of oil's gains. "That was a clear driver in my view."

Despite the rise, plenty of bearish factors loomed.

Iraq, OPEC's second largest producer, plans to export near-record volumes of Basra crude in September, adding to an already oversupplied market.

China's shaky economic growth, and recent moves by Beijing to devalue its currency, have cast doubt on its potential oil consumption.

China's implied oil demand fell in July from the previous month amid a continuing drop in its vehicle sales that could mute growth further in the second half of 2015.

"All is not well with the Chinese economy," Howie Lee of Phillip Futures told Reuters Global Oil Forum.

"There is so much pessimism attached to this move (yuan devaluation). For China to start a fresh currency war... smacks of desperation," he added.

Falling margins at Asian refineries have led Chinese and Korean refiners to cut production, thus lowering their demand for crude oil.

Problems with a major refinery in the U.S. Midwest, along with the coming refinery maintenance season, have also raised fears that the country's Cushing, Oklahoma, oil hub could fill its storage tanks.

(Additional reporting by Henning Gloystein and Jacob Gronholt-Pedersen in Singapore; Editing by)