Oil prices rise on US inventory decline.

LONDON -- Oil prices rose 1% on Thursday amid Middle East tensions and a big fall in US crude stocks, but gains were capped as weak manufacturing data in Western nations indicated slowing economic growth that could reduce fuel demand.

Brent crude futures rose $0.64 to $63.82 a barrel by 1020 GMT, after dropping 1% on Wednesday. US West Texas Intermediate crude was up $0.51, or 0.9%, at $56.39 a barrel, having dropped 1.6% the previous session.

US crude stocks fell by nearly 11 million barrels last week, the Energy Information Administration reported on Wednesday, well above analysts' expectations for a drop of 4 million barrels.

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'While that draw was influenced by temporary factors - Hurricane Barry - US crude inventories have plunged by 40 million barrels over the last six weeks, suggesting the oil market is finally rebalancing,' UBS analyst Giovanni Staunovo said.

In a sign of the supply-demand balance, Brent briefly dipped into contango on Wednesday for the first time since March. Contango is a market structure in which prices for forward deliveries are higher than for prompt ones.

Oil prices have also been under pressure from concerns about global economic growth amid growing signs of harm from the US-China trade war that has rumbled on over the last year.

But the White House eased some concerns, saying top US and Chinese negotiators would meet next week to continue talks, and global equities edged up on the news.

'Despite the bullish supply-side fundamentals and geopolitics that support oil prices, it seems that the...