Oil prices rise on hopes for new China stimulus

New York's main contract, light sweet crude for August, surged $1.02 to close at $87.10 a barrel.

In London trade, Brent North Sea crude for delivery in August settled at $102.40 a barrel, gaining $1.33 from Thursday's closing level.

Oil prices had fallen in earlier Asian trade after news that economic growth in China, the world's largest energy consumer, slowed to its lowest level in three years during the second quarter.

However, the market then rebounded on mounting speculation that the Chinese government could be spurred into action.

China grew 7.6 percent in the second quarter year-on-year, the slowest rate since the world's second-largest economy expanded by 6.6 percent during the depths of the global financial crisis at the start of 2009.

"Following the Chinese data... with (economic) indicators broadly near pre-crisis stimulus levels, crude prices are firming nicely today in tandem with metals, on hopes the Chinese government may implement further policy action," said Sucden analyst Jack Pollard.

"The China stimulus story looks all the more apparent, boosting commodities, as European equities remain mixed, peripherals (eurozone government bonds) sell off and the euro struggles to pare the week's losses."

Prices also found support on the back of fresh US sanctions on key oil producer Iran.

"Oil rose after US added sanctions on Iran targeting proliferation," said JPMorgan analysts.

The United States ratcheted up pressure on Thursday to convince Tehran to take seriously concerns about its suspected nuclear weapons program.

The actions impose additional sanctions on Iran's nuclear and ballistic missile proliferation networks and identify Iranian "front" companies and banks to assist in compliance, the US Treasury Department said.