UPDATE 9-Oil extends gains despite weak demand outlook

* U.S. crude inventories register surprise draw last week
* Sentiment dented by economic outlook
* Pence takes aim at China ahead of trade talks
* Prospects of further action by OPEC+ offer support

(Adds settlement prices, comments, detail on tropical
depression)
By Devika Krishna Kumar
NEW YORK, Oct 24 (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 LCOc1 ended the session up 50 cents, or 0.8%,
at $61.67 a barrel, having risen 2.5% on Wednesday.
West Texas Intermediate (WTI) crude CLc1 settled 26 cents,
or 0.5%, higher at $56.23, adding to the previous session's 2.8%
gain after data showed that U.S. inventories dropped by 1.7
million barrels last week. EIA/S
"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% 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.
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 CLc1-CLc2 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% 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.
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.