Oil prices rise on supply picture

By Ahmad Ghaddar

LONDON (Reuters) -Oil prices rose on Thursday, boosted by a large drawdown in inventories and production cuts by OPEC+, and as U.S. data showed slowing inflation in the world’s biggest consumer.

futures for October, expiring on Thursday, rose 94 cents, or 1.1%, to $86.80 a barrel by 1406 GMT. The more active November contract was up 92 cents, or 1.1%, at $86.16.

U.S. West Texas Intermediate crude futures for October rose $1.24, or 1.5%, to $82.87.

U.S. government data on Wednesday showed the country’s crude inventories fell by a larger than expected 10.6 million barrels last week, depleted by high exports and refinery runs.

Meanwhile, analysts expect Saudi Arabia to extend a voluntary oil production cut of 1 million barrels per day (bpd) into October, adding to cuts put in place by the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, a combination known as OPEC+.

“With Brent prices having stalled in the mid-$80s … the prospect of those Saudi barrels returning to the market any time soon looks slim and the impact is increasingly being felt across the world as commercial stock levels of crude and fuel products continue to drop,” said Saxo Bank analyst Ole Hansen.

U.S. consumer spending increased 0.8% last month, the Commerce Department reported on Thursday, but slowing inflation strengthened expectations that the Federal Reserve would keep interest rates unchanged next month.

The Fed can end its cycle of increases to interest rates if the labour market and economic growth continue to slow at the current gradual pace, the former president of the Boston Fed said on Wednesday.

Weak Chinese factory data limited further gains, however.

China’s manufacturing activity shrank again in August, an official factory survey showed on Thursday, fuelling concerns about weakness in the world’s second-biggest economy.

China’s official purchasing managers’ index (PMI) rose to 49.7 from 49.3 in July, the National Bureau of Statistics said, but it remained below the 50-point level. A reading above 50 points represents expansion from the previous month.

Meanwhile, the U.S. government revised down its gross domestic product growth to 2.1% in the past quarter, from the 2.4% pace reported last month, and data released on Wednesday showed private payroll growth slowed significantly in August.