Benchmark Brent crude was up 35 cents, or 0.3 percent, at $85.70 a barrel by 11:34 a.m. EDT, after rising more than $1 or 1 percent earlier to a session high of $86.48.
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The U.S. West Texas Intermediate crude turned negative in choppy afternoon trading after hovering in positive territory throughout the morning and hitting a session peak at $84.05 a barrel in New York.
Implied oil demand in China, the world's largest energy consumer, jumped 6.2 percent in September from August to 10.3 million barrels per day, the highest since February, data showed.
China's economy also expanded above forecasts, growing 7.3 percent in the third quarter, although that was the slowest pace since the global financial crisis. Factory output rose 8 percent in September from a year earlier.
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"Oil is up in reaction to the Chinese demand figures. But this is a rally that should be sold into," said Tamas Varga, analyst at London-based brokerage PVM Oil Associates.
"The rise in implied Chinese oil demand may have more to do with filling stockpiles. Chinese companies have been buying crude oil because it has been cheap."
Christopher Bellew, a senior oil broker with Jefferies in London, agreed.
"Looking forward, I think we'll see more pressure to the downside," Bellew said. "These lower prices will take a while to have any impact on supply."
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European equity markets rose on news that the European Central Bank was considering a corporate bond-buying plan to boost the economy, providing a glimmer of hope after months of dire data.
The International Energy Agency, meanwhile, slashed its world oil demand growth forecast for next year. On Wall Street, investment bank Citigroup cut its forecast for Brent to $92 and U.S. crude to $83 for the fourth quarter.
Some members of the Organization of the Petroleum Exporting Countries have indicated the group is unlikely to cut output ahead of its Nov. 27 meeting. Others are preparing 2015 budgets with lower oil prices.
CNBC contributed to this story.