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An oil pump works near the sea in Boca de Jaruco, Cuba, on Sept. 23, 2019.

ALEXANDRE MENEGHINI/Reuters

Oil prices extended their gains on Thursday, with Brent rising above $61 a barrel as a surprise drop in U.S. crude inventories and the prospect of further market-supporting action by OPEC and its allies offset some concern over the outlook for demand.

Brent crude ended the session up 50 cents, or 0.8 per cent, at $61.67 a barrel, having risen 2.5 per cent on Wednesday.

West Texas Intermediate (WTI) crude settled 26 cents, or 0.5 per cent, higher at $56.23, adding to the previous session’s 2.8 per cent gain after data showed that U.S. inventories dropped by 1.7 million barrels last week.

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“We feel that even minor supportive headlines on the trade front or geopolitical developments could prompt an exaggerated price response in a market in which net speculative WTI length had dropped into the red zone,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

Some of Thursday’s gains also appeared to be driven by reports of a possible tropical depression developing in the U.S. Gulf coast region that could potentially hamper crude production or refinery activity, Ritterbusch said.

A low pressure area located over the Bay of Campeche has a 50 per cent chance of becoming a cyclone in the next 48 hours, the U.S. National Hurricane Center said on Thursday.

U.S. Vice President Mike Pence accused China of curtailing “rights and liberties” in Hong Kong in a wide-ranging critique of Beijing’s behavior but also insisted that the United States does not seek confrontation or to “de-couple” from its main economic rival.

Pence delivered his second major policy address on China in just over a year, this one just ahead of a new round of talks aimed at resolving a bitter trade war between the world’s two biggest economies.

The recent truce in the U.S.-China trade war is not an economic turning point and has done nothing to reduce the risk that the United States could slip into recession in the next two years, a Reuters poll of economists found.

In the latest sign of economic weakness, employment in Germany’s private sector fell for the first time in six years in October, a survey showed.

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Oil’s gains were supported by the drop in U.S. crude inventories last week, and one analyst said stocks could fall further in coming weeks.

“The seasonal weakness in crude oil processing now appears to have come to an end, and processing should increase again,” Commerzbank analyst Carsten Fritsch said.

Still, WTI time spreads have been pressured by continuing inventory builds in Cushing Oklahoma, the delivery point for U.S. crude futures.

Stockpiles at the hub rose by about 1.6 million barrels in the week through Oct. 22, traders said, citing data from market intelligence firm Genscape.

Brent prices, meanwhile, have risen 14 per cent this year, supported by a supply pact among the Organization of the Petroleum Exporting Countries and its allies.

Since January OPEC, Russia and other producers have implemented a deal to cut oil output by 1.2 million barrels per day until March 2020 to support the market. The producers meet on Dec. 5-6 to review the policy.

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Adding further price support, officials have said that extended supply curbs are an option to offset the weaker demand outlook for OPEC crude in 2020.

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