Oil rises over 2 pct after U.S. housing data

By Joshua Schneyer

NEW YORK (Reuters) - Oil prices rose more than 2 percent on Friday, staging their first weekly gain in a month, after U.S. housing data sparked optimism that a battered sector of the economy may be primed for recovery.

Oil rose for a fifth day and was on track for a gain of more than 6 percent on the week, partially reversing its 10 percent plunge last week.

A government report Friday showed construction of new homes and building permits in the United States rose more than expected in June, signalling a potential economic recovery.

The housing data added further support to oil prices after better-than-expected U.S. corporate earnings and robust Chinese economic growth figures this week.

Renewed violent protests over the contested presidential election in crude supplier Iran on Friday, and a tropical wave in the Central Atlantic that posed a threat of developing into a tropical storm, also spurred oil buying ahead of the weekend.

"Oil is rebounding because there's a sense we have probably overplayed pessimism about the economy lately, and prices had fallen too far," said Phil Flynn, an analyst at PFGBest Research in Chicago.

"Increased tension in Iran and a tropical wave (in the Atlantic) are also considerations. People don't want to be caught short over the weekend."

U.S. crude oil for August delivery was up $1.70 at $63.72 a barrel by 1810 GMT (7:10 p.m. British time). London Brent crude for September rose $1.80 to $65.55 a barrel.