Oil is heading higher after two weekly losses, amid optimism about Chinese demand

Oil prices are heading to record a weekly rise on Friday, after incurring losses for two consecutive weeks, amid optimism about the rise in energy demand in China, the largest importer of crude, and the weakness of the dollar.

By 0632 GMT, Brent crude futures rose 20 cents, or 0.3 percent, to $75.87 a barrel, while US West Texas Intermediate crude futures rose 16 cents, or 0.2 percent, to $70.78 a barrel. The two benchmarks rose nearly 3 percent in the previous session.

Thursday’s data showed oil refinery output in China rose 15.4 percent in May from a year earlier, the second-highest total level ever. The CEO of Kuwait Petroleum Corporation said that Chinese demand for oil is expected to continue to rise during the second half of the year.

In the US, data on Thursday showed retail sales rose unexpectedly in May, and jobless claims increased more than expected last week. The dollar index fell to a five-week low against a basket of currencies.

A weaker dollar makes oil cheaper for holders of other currencies, which could boost demand.

Analysts also expect prices to be supported by voluntary crude production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies since May and by Saudi cuts in July.

However, market sentiment is clouded by a weak economic outlook, as China’s industrial output and retail sales growth missed expectations in May.

The European Central Bank raised interest rates on Thursday to a 22-year high, as expected. The Federal Reserve this week signaled a new increase of at least half a percentage point by the end of the year.

Higher interest rates ultimately increase borrowing costs, which can slow economic growth and reduce demand for oil.