Oil prices eased on Thursday after data showed China's manufacturing activity shrank for the fifth month in a row, and as investors cautiously awaited a U.S. personal consumption expenditure report later in the day for any clues on the interest rate outlook.
Brent crude futures for October, which expire on Thursday, dipped 9 cents, or 0.1%, at $85.77 per barrel by 0630 GMT. The more active November contract was down 10 cents, or 0.1%, at $85.14.
U.S. West Texas Intermediate crude futures for October eased 6 cents, or 0.1%, at $81.57.
China's manufacturing activity again in August, an official factory survey showed on Thursday, fuelling concerns around weakness in the world's second-biggest economy.
The official purchasing managers' index (PMI) rose to 49.7 from 49.3 in July, according to the National Bureau of Statistics, but remained below the 50-point level demarcating contraction from expansion.
A tighter U.S. oil supply outlook supported prices in the previous session, but this was pitted against worries about demand, said Yeap Jun Rong, a market strategist at IG.
"Overall, the conflicting factors force prices onto some indecision today, further brought on by some wait-and-see as focus turns to the U.S. core PCE release later tonight," Yeap said.
Investors are eyeing inflation numbers as measured by the U.S. personal consumption expenditures, which will be released on Thursday. The PCE is the Federal Reserve's preferred gauge of inflation.
For now, oil prices are headed for a weekly climb, with U.S. government data showing tighter-than-expected crude supplies, while a military coup in Gabon, an OPEC member, also raised fears of crude oil supply disruptions.
Analysts expect Saudi Arabia to roll over a voluntary oil cut of 1 million barrels per day for a third consecutive month into October, adding to the cuts in place by OPEC+, the Organization of the Petroleum Exporting Countries and allies led by Russia.
Meanwhile, the U.S. government revised down its gross domestic product growth to 2.1% last quarter, from the 2.4% pace reported last month, and data released on Wednesday showed private payroll growth slowed significantly in August.
The Federal Reserve can end its interest rate increase cycle if the labour market and economic growth continue to slow at the current gradual pace, the former president of the Boston Fed said on Wednesday.
"Bad news was good, as weaker U.S. economic data lowered expectations of another rate hike," ANZ Research said in a note. Higher interest rate reduce demand and pressure oil prices down.