LONDON, Aug 23 (Reuters) - Oil prices rose by more than a dollar on Thursday to top $116 a barrel on renewed hopes for a third round of monetary stimulus by the U.S. Federal Reserve despite weak economic data from China.
Brent crude futures were up $1.34 to $116.25 a barrel by 0902 GMT, rising for a third straight session.
U.S. crude was up 84 cents at $98.10 per barrel, off a three-month high of $98.29 earlier in the session.
Investors and traders are betting that additional monetary stimulus is imminent following minutes from the last U.S. central bank meeting, released late on Wednesday.
The minutes noted many Federal Reserve members "judged that additional monetary accommodation would likely be warranted fairly soon" unless the economy improves considerably.
This is being interpreted as a hint that the Federal Reserve could act at next week's Jackson Hole Symposium where its Chairman Ben Bernanke is scheduled to speak along with European Central Bank President Mario Draghi.
Dominick Chirichella of the Energy Management Institute noted that Bernanke had announced the second round of quantitative easing at Jackson Hole in 2010.
Further stimulus may weaken the dollar, which in turn will lift commodities priced in dollars, while any boost to the U.S. economy from the stimulus may also drive up oil demand.
"Market sentiment after the Fed minutes suggests we'll see further price gains today," said Carsten Fritsch, an energy analyst at Commerzbank in Frankfurt.
Copper rallied to a one-month high on the news, gold and silver rose to three-month highs and European shares were up in early trading, shrugging off business survey data that suggested the eurozone was heading for its second recession in three years.
Fritsch predicted that Brent could hit its previous three-and-a-half month high of $117 a barrel on either Thursday or Friday given the monetary stimulus hopes.
"It is very likely they will do something if the economy doesn't pick up. But better-than-expected economic data could prevent it," he said.
The market will be looking to U.S. weekly initial jobless claims later on Thursday for further clues. "The labour market is the weak spot in the U.S. economy," Fritsch said.
The forecast is for little change in the data with initial jobless claims seen at 365,000.
CHINA DATA DISAPPOINTS
The stimulus hopes outweighed disappointing data from China which signalled that the slowdown in the world's biggest energy consumer had extended into the third quarter.
The HSBC Flash China manufacturing purchasing managers index (PMI) fell to 47.8 in August, its lowest level since November, down from 49.5 in July.
After hovering for several months just under the 50 mark that divides expansion from contraction, the index is now at levels rarely seen since the 2008-2009 global financial crisis.
But some traders took this as a sign that China would also have to undertake further monetary easing to boost growth.
The market was also digesting weekly U.S. data showing a sharp fall in crude oil inventories due to a drop in crude imports. The Energy Information Administration reported a fall of 5.41 million barrels, exceeding consensus forecasts for a 400,000 barrel drop. (Additional reporting by Ramya Venugopal in Singapore; editing by Jason Neely)
