NEW YORK: Oil prices rallied about 1pc on Thursday on a sharp decrease in US crude inventories and investor hopes of progress in resolving the US-China trade feud.

Global benchmark Brent crude gained 66 cents, or 1.1pc, to$61.36 a barrel by 1:33 p.m. EDT (17:33 GMT). US West Texas Intermediate (WTI) crude added 57 cents, or 1pc, to $56.83 a barrel.

US crude, along with gasoline and distillate inventories, fell last week. Crude stocks dropped 4.8 million barrels, which was more than the 2.5 million barrel draw analysts had expected, the Energy Information Administration said.

Net US crude imports, however, rose last week by 934,000 barrels per day.

“It's definitely a bullish report all around," said Bob Yawger, director of energy futures at Mizuho in New York. “A big import number would usually be bearish, but it didn't seem to dent the bullish end to the equation."

The volume of US crude oil in storage should decrease in coming weeks before reversing course with the end of peak driving season and the start of significant refinery maintenance work, said Andrew Lipow, president at Lipow Oil Associates in Houston.

Crude prices had gained more than 4pc on Wednesday as positive Chinese economic data sparked a wider market rally.

On Thursday, China said Beijing and Washington had agreed to hold high-level trade talks in early October, which helped boost prices as investors hoped for an easing of the trade war between the world's two top economies that has taken a toll on global growth.

However, the market remained cautious than any deal would come together soon, limiting the oil rally.

“I think the market across the board has built in as much hopefulness as they can about the US-China trade war," said John Kilduff, a partner at Again Capital in New York.

The prolonged US-China trade dispute has been a dampener on oil prices, but Brent is still up about 12pc this year, helped by production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia.

Nonetheless, both OPEC and Russia boosted production in August, according to a Reuters survey and Russian energy ministry figures, weighing on prices.

Also putting downward pressure on prices has been mounting evidence of slowing economic growth worldwide, which has prompted analysts to lower forecasts for oil demand growth.

BP Chief Financial Officer Brian Gilvary told Reuters on Wednesday that global oil demand was expected to grow by less than 1 million barrels per day in 2019, a slowdown from previous years.

Copyright Reuters, 2019