NYMEX crude up on pre-weekend short-covering

NEW YORK, July 25 (Reuters) - U.S. crude oil futures were up Friday morning, extending Thursday's technical rebound and as traders covered short positions ahead of the weekend.

On the New York Mercantile Exchange at 8:40 a.m. EDT (1240 GMT), September crude CLU8 was up 33 cents or 0.26 percent at $125.82 a barrel, trading from 4125.38 to $126.51.

The contract rose $1.05 on Thursday, recovering from a seven-week low of $123.50. At that price, NYMEX crude had fallen more than $23 or 16 percent from the record $147.27 hit on July 11.

In London, September Brent crude LCOU8 was up 31 cents or 0.25 percent at $126.75 a barrel, trading $126.39 to $127.51.

Some analysts said the day's price direction may come from equities markets, which tumbled on Thursday amid weakness in the economy reflected in falling demand for oil and concerns about corporate profits.

"But with the stock market coming under increasing downside pressure, a case for an improving economy capable of reviving petroleum demand any time soon could prove difficult to establish," said Jim Ritterbusch, president of Ritterbusch & Associates.

"As a result, significant downside risk remains to as low as the $117 area within a one-two week time frame," he added.

Data from the U.S. Energy Information Administration this week showed bearish builds in gasoline and distillate products amid stagnant demand.

EIA also reported a larger-than-expected drawdown in crude stocks, "but because there is a surplus on the product side of the market, the overall inventory situation is relatively comfortable," said Tim Evans, analyst at Citi Futures Perspective.