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Oil extends gains on lower U.S. rig count, China stimulus

SINGAPORE (Reuters) – Oil prices rose on Monday, extending last week’s gains as a drop in the number of U.S. rigs drilling for crude pointed to lower supply later in the year, while China’s latest stimulus measure also underpinned the market.

U.S. oil drilling rigs fell for a record 19th straight week to the lowest since 2010, data from Baker Hughes showed on Friday.

While the drop slowed, suggesting the collapse in drilling could be coming to an end, Schlumberger Ltd  – the world’s largest oilfield services company – said an eventual recovery in U.S. oil drilling activity may never reach last year’s frenzied pace.

Oil markets also found some support from a move by China’s central bank on Sunday to combat slower growth by cutting the amount of cash that banks must hold as reserves.

Brent crude <CLOc1> was up 72 cents at $64.17 a barrel by 0324 GMT. It settled lower on Friday but finished the week 9.6 percent higher, its biggest weekly gain in more than five years.

U.S. crude for May delivery <CLc1> was up 75 cents at $56.49 a barrel. The contract, which expires on Tuesday, also fell on Friday but registered a fifth straight weekly gain.

“When we start to see real production cuts in the United States, I suspect more upside to oil prices,” said Ric Spooner, chief market analyst at Sydney’s CMC Markets.

“But the market will find it hard to push U.S. prices much higher than mid-$60s and low-$70s for Brent, because even with U.S. production cuts the global oil market will remain well-supplied,” said Spooner.

Brent reached its highest this year on Thursday, sparked by an escalating conflict in Yemen that raised concerns about risks to supply from the region’s major exporters, such as Saudi Arabia.

The leader of Yemen’s Iranian-allied Houthi militia accused Saudi Arabia on Sunday of plotting to seize the country, suggesting he was in no mood to compromise despite more than three weeks of Saudi-led bombing.

In Iraq, Kurdish authorities said their forces, backed by U.S.-led coalition air strikes, pushed back Islamic State militants in northern Iraq over the weekend, widening a buffer around the oil-rich city of Kirkuk.

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