Oil edges down but WTI set for record 10th week of gains

By Florence Tan

SINGAPORE (Reuters) - Oil prices edged down on Friday after rising more than 2 percent in the previous session, buoyed by lower U.S. crude inventories and geopolitical tension in the Middle East.

U.S. crude futures are in their longest winning streak since records began in 1983, helped by a drop in crude and product stockpiles last week, reflecting better demand in the world's largest oil consumer.

West Texas Intermediate for July delivery was at $60.66 a barrel by 0648 GMT, down 6 cents on the day but poised to post gains for the 10th week.

July Brent crude fell 5 cents to $66.49 a barrel after closing up 2.3 percent on Thursday. Front-month Brent prices are set to post a small drop this week.

Wednesday's data from the Energy Information Administration showed a big decline in U.S. oil product stockpiles, suggesting end-user demand has been strong, ANZ analysts said in a note. [EIA/S]

"With U.S. travel expected to reach a 10-year high over Memorial Day, according to AAA (American Automobile Association), product inventory is expected to decline even further over coming weeks," the analysts said.

WTI is also supported by expectations of a reduction in shale oil production growth although prices are unlikely to move higher, said Ric Spooner, chief analyst at CMC Markets in Sydney.

"If we were to see prices $5-$10 higher, that would attract new production, so the upside is capped," he said, adding that this encourages traders to sell whenever prices rally.

U.S. crude stocks in delivery hub Cushing, Oklahoma, fell by almost 740,000 barrels between Friday and Tuesday, trade sources said, citing a report by market intelligence firm Genscape.

Global demand for oil products has been surprisingly strong as low prices have boosted consumption, even in Europe, where gasoline growth has been declining, an executive from Vitol, the world's largest independent oil trader, said earlier this week.

Fighting in Iraq added to geopolitical tension in the Middle East. Concern that growing conflicts in the region could disrupt supply has underpinned oil prices.

A weaker dollar in the past month has also made dollar-denominated oil more affordable for investors who hold other currencies.

Investors are looking to a speech by Fed Chair Janet Yellen on Friday for more indication on when interest rate increases may come and the subsequent impact on the dollar.

Baker Hughes data on U.S. weekly rig counts, widely used as a barometer for oil production, will also be out on Friday.

(Editing by Alan Raybould and Subhranshu Sahu)