UPDATE 3-Oil bounces as China data eases economy worry

Simon Falush

* China HSBC flash PMI at 3-month high, signals recovery

* U.S. crude stockpiles rose slightly last week -API

* Iran supply worry underpins prices

* Coming Up: EIA data 1430 GMT, Federal Reserve policy decision 1815 GMT

(Updates throughout, changes dateline from SINGAPORE)

SINGAPORE, Oct 24 (Reuters) - Oil rose on Wednesday, snapping a six-day losing streak, after economic data from China suggested a gradual recovery in the world's No. 2 oil consumer, though weak European data kept the gain slim.

China's economy is slowly picking up from its weakest period of growth in three years, a survey of purchasing managers signalled, with new orders and output at their highest in months.

However in Europe, the economic outlook remained grim with businesses across the euro zone suffering their worst month since October, according to PMI data, while German business sentiment dropped for the sixth successive month in October.

Brent crude was up 63cents at $108.88 a barrel by 0855 GMT. It had fallen in each of the six previous trading sessions, the longest losing streak in more than two years.

U.S. oil rose 19 cents to $86.86.

``The Chinese data has given the market a bit of a boost and prompted some short covering, the demand picture is looking less bad than it was,'' said Jack Pollard, research analyst at Sucden Financial.

Brent oil hit an intraday low of $107.31 on Tuesday, the weakest since Sept. 20 and below its 100-day moving average at $107.42. The U.S. contract slumped more than 3 percent session to touch a session-low of $85.69, the lowest since July 13.

Oil prices have been under pressure because of a weak demand outlook from the world's top two oil consumers.

Faced with weakening revenue, three of the largest U.S. companies, including Dow Chemical Co, warned that they would cut jobs to protect profits.

Investors were awaiting inventory numbers from the Energy Information Administration (EIA) due later in the day to gauge the demand outlook for the United States.

Crude inventories are seen 1.9 million barrels higher for the week ended Oct. 19. All 13 analysts forecast a build in crude stockpiles.

Crude oil inventories as measured by the API increased by 313,000 barrels in the week to Oct. 19, compared with an analyst forecast for an increase of 1.9 million barrels.


Lower supply from Nigeria has provided some support to prices. Nigeria lost around 500,000 barrels per day of oil production due to severe flooding in recent weeks but output is now back to normal, an oil industry regulator told Reuters on Wednesday.

Fears of possible supply disruptions due to unrest in the Middle East have also lent some support.

Iran's oil minister Rostam Qasemi said on Tuesday his country would stop oil exports if pressure from Western sanctions got any tighter and that it had a ``Plan B'' contingency strategy to survive without oil revenues.

Western nations led by the United States have imposed tough sanctions on Iran this year in an attempt to curb its nuclear programme that they say is designed to produce atomic weapons. Tehran says its nuclear plans are peaceful.

Qasemi's statement is the latest in a series of threats of retaliation by Tehran in response to the sanctions, which have heightened political tensions across the Middle East and, analysts say, led to a sharp drop in Iranian oil exports.

(Additional reporting by Manash Goswami and Florence Tan in Singapore; editing by James Jukwey)