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By Ambar Warrick
Investing.com– Oil prices rose further on Thursday after expectations of declining U.S. supply sparked a two-day rally, with focus now turning to upcoming Chinese manufacturing data and an OPEC meeting that could potentially result in more supply curbs.
Crude oil rebounded about 4% in the past two sessions, recovering from an eight-month low as a hurricane in the Gulf of Mexico caused disruptions in U.S. crude supply. Prices were also supported by U.S. crude inventories showing a surprise drawdown last week, which dispelled some concerns over dwindling short-term demand.
U.S. crude oil inventories fell by 215,000 barrels in the week to Sept. 23, with gasoline inventories logging a substantially bigger than expected 2.4-million-barrel decline.
Emergency bond purchases by the Bank of England also supported overall risk sentiment, as the bank moved to stabilize local financial markets after steep losses this week. The dollar retreated from 20-year peaks, taking more pressure off oil prices.
On Thursday, London-traded Brent oil futures, the global benchmark, rose 0.4% to $88.10 a barrel, while U.S. West Texas Intermediate crude futures were flat at $82.19 a barrel by 21:21 ET (01:21 GMT).
Focus now turns to upcoming Chinese manufacturing activity data, due on Friday. The reading is expected to show a sustained decline in Chinese industrial activity, pointing to constrained demand in the world’s largest crude importer.
Markets are also awaiting a meeting of the Organization of Petroleum Exporting Countries next week, where the cartel is expected to potentially cut production in order to support crude prices. Analysts at Oanda expect the cartel to cut supply between 500,000 to 1 million barrels per day.
Expectations of a supply cut grew after several recent warnings by OPEC members that they would act decisively to support prices.
Traders also expect the cartel to act more aggressively after its previous supply cut of 100,000 barrels per day was widely regarded as nominal.
The move is expected to boost oil prices, which are languishing near annual lows amid growing fears that slowing economic growth will severely dent crude demand.
Strength in the dollar has also weighed heavily on prices by making it more expensive to import crude.
But oil prices may see an extended recovery in the fourth quarter, helped by increased demand for heating oil and a further cut in Russian crude supply.