Oil bounces on China shares rebound, economic data

By Christopher Johnson

LONDON (Reuters) - Crude oil prices bounced on Thursday on strong economic data from Japan and Germany, and as Chinese shares picked up after the government launched new steps to halt a rout in its stock markets.

Front-month U.S. crude futures were up 80 cents at $52.45 a barrel by 0745 GMT, but were still almost 8 percent lower than at the end of last week.

Brent crude was 70 cents higher at $57.75 a barrel, though still 4 percent below last Friday.

Chinese stocks rallied on Thursday after the securities regulator banned shareholders with large stakes in listed firms from selling, in Beijing's most drastic step yet to stem a sell-off that has roiled global financial markets.

Chinese police were investigating clues pointing to potentially "malicious" short-selling of Chinese shares, state news agency Xinhua said on Thursday.

Demand for oil was also supported by the return from maintenance of a 120,000 barrels per day crude distillation unit in Japan, where machinery orders hit a 7-year high in May.

German exports rose at their fastest pace this year in May, boosting expectations that Europe's largest economy would pull off stronger growth in the second quarter after expanding modestly in the first.

Traders said downward momentum in oil had been broken by two days of gains and sentiment was more positive on Thursday.

"Supports held after the sharp sell-off on Monday and these supports were not seriously tested yesterday," said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.

"This, however, does not mean that bears threw the towel in," Varga added.

Oil prices still faced strong headwinds.

"Oil is being pressured on multiple fronts, and China's equity wobble, the prospect of Iran's re-entry to the market and low liquidity all add up to an extremely fraught environment," said Ole Hansen, head of commodity strategy at Saxo Bank.

A surprise increase in U.S. stockpiles despite the peak-demand American summer driving season added to global oversupply as the Organization of the Petroleum Exporting Countries and Russia produce at near-record levels.

Iranian exports could also increase strongly if major global powers and Iran find a compromise in nuclear talks this week that could lead to a lifting of western sanctions against Tehran.

(Editing by Pravin Char)