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Oil prices crept higher on Thursday as a lower-than-expected drop in U.S. crude inventories and a weaker demand outlook kept investors cautious.

September Brent futures climbed 24 cents, or 0.3%, to $79.70 a barrel by 1255 GMT, while August U.S. West Texas Intermediate (WTI) crude gained 26 cents, or 0.4%, to $75.61 a barrel.

The August WTI contract expires on Thursday. The more active September WTI crude was 31 cents, or 0.4%, higher at $75.60.

Prices fell in the previous session after data showed U.S. inventories fell less than analysts expected.

"Yesterday's U.S. EIA (Energy Information Administration) oil stock report proved something of a disappointment for those that were looking for inspiration," PVM Oil analysts said.

China's economic recovery following its end to COVID-19 curbs has fallen short of expectations. Its oil imports year-on-year surged by nearly half in June, but at the same time stock levels rose to near an all-time high. Traders said China had been pragmatically buying discounted Russian crude.

The Organization of the Petroleum Exporting Countries and the International Energy Agency have said China's demand is expected to continue to rise in the second half of this year and remain the main driver of global growth.

China's imports of crude oil from Russia hit an all-time high in June, Chinese government data showed on Thursday, even as discounts against international benchmarks narrowed.

Crude prices may struggle to find a clear direction given a mixed global demand outlook in the next few weeks, Citi analysts said in a note.

Demand is "a mixed picture with stronger gasoline and jet fuel demand, but weaker petchems and diesel," the analysts said.

Brent crude prices have broken through to a higher range this month, after being stuck at $72-$78 in May and June, the Citi analysts added, after Saudi output cuts and geopolitical risks supported demand.