Oil rises as Chinese factory bounce boosts demand outlook

China's manufacturing activity expanded at the fastest pace in more than a decade in February, an official index showed on Wednesday, adding to hopes that the country's recovery can offset a global slowdown and increase oil demand.

Brent crude rose 45 cents, or 0.5%, to $83.90 a barrel at 0910 GMT. US West Texas Intermediate (WTI) crude gained 49 cents, or 0.6%, to $77.54.

"China's economy is rebounding now, and this can only be a positive driver for oil prices," said Stephen Brennock of oil broker PVM.

While China's official manufacturing purchasing managers' index (PMI) climbed to 52.6 last month against 50.1 in January, a private sector survey also showed activity rising for the first time in seven months.

"Another round of upside surprise in China's PMI further provides conviction of a stronger-than-expected recovery, which supports a more optimistic oil demand outlook," said Yeap Jun Rong, market strategist at IG.

The demand signal from China was offset by signs of rising supply with an industry report pointing to rising crude stocks in the United States, the world's top consumer.

US oil inventories rose by 6.2 million barrels in the week ended Feb. 24, according to market sources citing American Petroleum Institute (API) figures on Tuesday.

Official inventory figures from the US government's Energy Information Administration (EIA) are due at 1530 GMT.

In another indication of rising supply, crude production by the Organization of the Petroleum Exporting Countries (OPEC) rose by 150,000 barrels per day in February, according to a Reuters survey.

REUTERS