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Oil prices extended gains from the previous session on Thursday on signs of stronger demand in the U.S. where data showed slower inflation than markets expected, bolstering the argument for an interest rate cut which could drive even greater consumption.

Brent futures rose 35 cents, or 0.4%, to $83.10 a barrel at 0310 GMT, while U.S. West Texas Intermediate crude (WTI) gained 40 cents, or 0.5%, to $79.03.

"A more tamed read for U.S. April inflation and a far weaker-than-expected read in U.S. retail sales seem to offer room for the Fed to consider earlier rate cuts, with market expectations leaning more firmly for policy easing to kickstart in September this year," said IG market strategist Yeap Jun Rong.

"The larger-than-expected drawdown in U.S. crude inventories for last week also offered some calm, while geopolitical tensions continue to rock on in the Middle East."

U.S. consumer prices rose less than expected in April in a boost to financial market expectations for a September rate cut by the Federal Reserve, which could temper dollar strength and make oil more affordable for holders of other currencies.

Elsewhere, U.S. crude oil, gasoline and distillate inventories fell, reflecting a rise in both refining activity and fuel demand, showed data from the Energy Information Administration (EIA).

Crude inventories fell 2.5 million barrels to 457 million barrels in the week ended May 10, the EIA said, versus the 543,000 barrel consensus analyst forecast in a Reuters poll.

Signs of slowing inflation and stronger demand were supporting prices, ANZ Research also said in a client note, as is geopolitical risk which it noted remains elevated.

In the Middle East, Israeli troops battled Hamas militants across Gaza, including Rafah which had been a civilian refuge.

Ceasefire talks mediated by Qatar and Egypt are at a stalemate, with Hamas demanding an end to attacks and Israel refusing until the group is annihilated.

Gains were constrained after the IEA trimmed its forecast for 2024 oil demand growth, widening the gap between its view and that of producer group OPEC.

Global oil demand this year will grow by 1.1 million barrels per day (bpd), IEA said, down 140,000 bpd from its previous forecast, largely due to weak demand in developed nations of the Organisation for Economic Co-operation and Development.