Oil extended gains well above $67 a barrel on Friday, after a 5.7 percent jump in the previous session on U.S. data and earnings which renewed hopes of an economic recovery and drove up equity and commodities markets.

But the latest jump merely erased Wednesday's hefty losses on rising U.S. crude inventories and falling refinery utilization, with oil heading for its first monthly percentage fall since January, of around 4 percent.

U.S. light crude for September delivery rose 44 cents to $67.38 a barrel by 12:32 a.m. EDT, having settled up 5.67 percent on Thursday, its biggest one-day gain since April 9.

London Brent crude gained 34 cents to $70.45.

Short-term fundamentals are weak but prices are moving up on expectations of an economic recovery. The market is driven by the medium- and longer-term outlook, said Tony Nunan, risk manager at Tokyo-based Mitsubishi Corp.

Markets rose on Thursday on government data showing the number of U.S. workers staying on jobless rolls fell to the lowest in three months last week, while the four-week moving average for new claims dropped by 8,250 to 559,000 -- the lowest level since late January.

Support also came from data showing euro zone economic sentiment increased in July to its highest level in eight months, helping to lift European equities to their highest close in nearly nine months.

Asian stock markets extended gains on Friday and were poised to score double-digit gains in July, with Japan's Nikkei average <.N225> hitting a 10-month high while stocks outside of Japan <.MIAPJ0000PUS> rose to an 11-month high.

Thursday's jump in oil prices came on the heels of Wednesday's 5.8 percent loss stemming from a 5.1 million barrels build in U.S. crude inventories and a 1.2 percentage point fall in refinery utilization.

We continue to anticipate an unusually tough trading environment in which price follow-through in either direction is unlikely to be sustained by more than 10 percent or much more than 1 or 2 weeks, said Jim Ritterbusch, president of U.S. energy adviser Ritterbusch and Associates.

Historical volatility rose to its highest level since May this week but implied volatility is more subdued at around 45 percent, well off early-July peaks. This suggests the options market is feeling more at ease with oil's recent $60-$70 range, even though the swings within it are more pronounced.

The market will be keeping its eyes trained on advance U.S. second-quarter GDP figures, to be released at 8:30 a.m. EDT, for further signs of an economic recovery.

U.S. President Barack Obama braced the country for more bad economic news on Thursday, saying the figures would show the economy contracted and job losses were still a huge problem.

(Editing by Michael Urquhart

Japan