Oil prices rise on bigger-than-expected drop in US crude inventories

(Reuters) – Oil prices rose on Thursday, driven by a larger-than-expected weekly decline in U.S. crude inventories.

Brent futures rose 13 cents, or 0.2%, to $85.21 a barrel by 0023 GMT, while West Texas Intermediate (WTI) crude rose 31 cents, or 0.4%, to $83 ,16.

Brent rose 1.6% on Wednesday and WTI rose 2.6%.

U.S. crude oil inventories fell by 4.9 million barrels last week, data from the U.S. Energy Information Administration showed. That compares with a 30,000-barrel decline predicted by analysts in a Reuters poll and a 4.4 million-barrel drop in a report from the American Petroleum Institute trade group. [EIA/S] [API/S]

On the demand side, the prospects of interest rate cuts in the coming months in the United States and Europe helped to support the market. Lower interest rates often stimulate purchases and increase demand for oil.

Federal Reserve officials said Wednesday that the U.S. central bank is “closer” to cutting interest rates, given the improved trajectory of inflation and a more balanced labor market, possibly setting the stage for a reduction in costs. of loans in September.

Furthermore, economic activity in the US expanded at a slight to modest pace from late May to early July, with businesses expecting slower growth in the future.

Meanwhile, the European Central Bank is all but certain to keep interest rates unchanged on Thursday, but has signaled its next move will likely be a cut.

Investors are also awaiting political news from a key leadership meeting in China that ends on Thursday.

The dollar fell on Thursday for the third session in a row. A weaker dollar could boost oil demand, making dollar-denominated raw materials like oil cheaper for holders of other currencies.

(Reporting by Arathy Somasekhar in Houston; Editing by Tom Hogue)