Wires

UPDATE 6-Oil rises further above $61, but weak demand outlook weighs

Alex Lawler

* U.S. crude inventories register surprise drop

* Sentiment dented by economic outlook

* Prospects of further action by OPEC+ offer support (Updates prices, adds analyst quote)

LONDON, Oct 24 (Reuters) - Oil edged further above $61 a barrel on Thursday as a surprise drop in U.S. crude inventories and the prospect of further market-supporting action by OPEC and its allies offset concern over the outlook for demand.

U.S. inventories dropped by 1.7 million barrels in the week to Oct. 18, and one analyst said stocks could fall further in coming weeks. OPEC and its allies meet in early December and could, officials have said, opt to deepen supply curbs.

Brent crude was up 20 cents at $61.37 a barrel at 1335 GMT, having risen 2.5% on Wednesday. U.S. West Texas Intermediate (WTI) crude rose 11 cents to $56.08.

"Oil may now be off its lows, but gains are very gradual and downward pressures, most notably as a result of the subdued global outlook, persist," said Craig Erlam, analyst at broker OANDA.

In the latest sign of economic weakness that has prompted projections of lower oil demand, employment in Germany's private sector fell for the first time in six years in October, a survey showed on Thursday.

Oil's gains on Wednesday were supported by the drop in U.S. crude inventories as reported by the Energy Information Administration (EIA).

"The seasonal weakness in crude oil processing now appears to have come to an end, and processing should increase again," Commerzbank analyst Carsten Fritsch said of the EIA report.

"All things being equal, this should result in further falling crude oil stocks."

Brent prices have risen 14% this year, supported by a supply pact among the Organization of the Petroleum Exporting Countries and its allies.

Since January OPEC, Russia and other producers have implemented a deal to cut oil output by 1.2 million barrels per day until March 2020 to support the market. The producers meet on Dec. 5-6 to review the policy.

Adding further price support, officials have said that extended supply curbs are an option to offset the weaker demand outlook for OPEC crude in 2020. (Additional reporting by Koustav Samanta Editing by Dale Hudson and David Goodman)