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Oil prices rose in early trade on Thursday as shrinking U.S. crude inventories signalled tighter supply, and amid rising hopes that the Federal Reserve would cut interest rates by the end of the year.

Brent crude futures for July rose 23 cents to $83.81 a barrel by 0033 GMT. U.S. West Texas Intermediate crude for June was up 29 cents to $79.28 per barrel.

Crude inventories dropped last week by 1.4 million barrels to 459.5 million barrels, according to the Energy Information Administration, more than analysts' expectations in a Reuters poll for a 1.1 million-barrel draw as refinery activity increased. [EIA/S] [API/S]

Rising gasoline stocks, which swelled unexpectedly by more than 900,000 barrels in the week to 228 million barrels, the EIA said, kept prices from moving higher.

Increasing expectations that the U.S. central bank will cut interest rates by year end after weaker-than-expected U.S. jobs data also boosted oil prices. Lower interest rates can increase spending on crude oil.

Hopes for a ceasefire in the Middle East, however, with the U.S. saying earlier in the week that negotiations on a Gaza ceasefire should be able to close the gaps between Israel and Hamas negotiations, kept oil prices from moving higher.