Brent edges up towards $108, positive Chinese data offsets US stocks build


* China HSBC flash PMI hits 7-mth high in Oct

* U.S. EIA reports big rise in U.S. crude stocks

* Brent/WTI spread narrows after widening to $13 in previoussession

By Jessica Jaganathan

SINGAPORE, Oct 24 (Reuters) - Brent crude futures edged uptowards $108 a barrel on Thursday after positive economic datafrom China, the world's second-largest oil consumer, helpedoffset another rise in U.S. crude stockpiles that had depressedprices overnight.

Strong new orders in October drove the biggest expansion inChina's manufacturing sector in seven months, according to apreliminary Markit/HSBC survey of purchasing managers, providingfurther evidence the economy was stabilising.

But U.S. crude oil inventories rose by 5.2 million barrelslast week, the fifth-largest build of the year, with stocks atthe Cushing hub rising for the second week in a row, showingthere was ample supply in the world's largest oil consumer.

Brent crude oil futures had gained 11 cents to$107.91 a barrel by 0255 GMT.

U.S. crude oil futures gained 61 cents to $97.47after ending at $96.86 a barrel in the previous session, thelowest settlement price since July 1.

"Brent will likely respond in a stronger way to the PMI dataas we have seen signs of stabilisation in China's growth ... butwe expect China to maintain a cautious monetary policy in thecoming months," said Vyanne Lai, an economist at NationalAustralia Bank.

"So unless there's some impetus from geopolitical risk inthe Middle East, we don't see Brent rising too strongly in thecoming months."

She added that recent high-level talks between Iran and theU.S., lingering uncertainties over the U.S. budget and risingoil production in the United States and Canada pointed to weakeroil fundamentals and would limit any gains in prices.

U.S. crude oil prices continued to outperform Brent and theBrent/WTI spread narrowed to $10.44 after hitting$13 a barrel in the previous session, the widest since April.

The positive news from the Markit/HSBC Purchasing ManagersIndex (PMI), the earliest reading of China's monthly economicperformance, follows a pick-up in economic growth in the thirdquarter.

But many economists see Chinese growth slowing again asglobal demand remains soft and as Beijing moves to restructurethe economy towards one driven more by consumer demand thaninvestment and credit.

Chinese money market rates have hit three-month highs asregulators show signs of concern that loose liquidity might befuelling another round of risky credit growth.

Total U.S. crude oil stockpiles have risen by 24 millionbarrels since mid-September, according to data from the U.S.Energy Information Administration (EIA), as some 1.3 millionbarrels per day (bpd) of refining capacity has been takenoffline.

Stockpiles at the Cushing, Oklahoma, delivery point for theU.S. contract have showed builds over the past two weeks,according to EIA data, snapping 14 straight weeks of drawdownsthat had helped support U.S. oil futures and tighten thediscount to Brent crude.

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