* U.S. crude stocks increase
* Chinese factory activity shrinks
* Brent set for small monthly fall, WTI for monthly gain
(Updates prices, adds expiry of contract)
By Shadia Nasralla
LONDON, Oct 31 (Reuters) - Oil prices came under pressure on
Thursday from rising U.S. crude oil stocks and weak factory
activity in China, with few bullish factors on the horizon.
Brent crude futures were down 13 cents at $60.48 a
barrel by 1338 GMT, erasing earlier gains. They had dropped by
1.6% on Wednesday and the contract is set for a monthly decline
of about 0.5%.
U.S. West Texas Intermediate (WTI) crude futures were
down 48 cents at $54.58. On the month, however, they are set for
a rise of about 0.9%, its biggest monthly gain since June.
The front-month Brent contract for December delivery expires
on Thursday. The one for January delivery was also down.
Factory activity in China shrank for a sixth straight month
in October while growth in the country's service sector activity
was its slowest since February 2016, official data showed on
Thursday.
A protracted trade war between China and the United States
has been weighing on the demand outlook for oil.
Leaders from the United States and China encountered a new
obstacle in their struggle to end the damaging trade conflict
when the summit at which they were supposed to meet was
cancelled because of violent protests in host nation
Chile.
U.S. President Donald Trump tweeted a new location would be
announced soon.
A Reuters survey showed on Thursday that oil prices are
likely to remain pressured this year and next. The poll of 51
economists and analysts forecast Brent crude would average
$64.16 a barrel in 2019 and $62.38 next year.
Releasing third-quarter results, Royal Dutch Shell
warned that uncertain economic conditions could slow its $25
billion share buyback programme, the world's largest, and had
led to a downward revision to its oil price outlook.
The U.S. Federal Reserve cut interest rates for a third time
this year on Wednesday, looking to bolster economic growth with
a move that could also boost demand for crude.
Yet gains are likely to be capped until inventories start to
show sustained declines.
U.S. crude inventories rose by 5.7 million
barrels in the week to Oct. 25, the U.S. Energy Information
Administration said on Wednesday, compared with analyst
expectations for an increase of 494,000 barrels.
"The U.S. stock report was anything but encouraging," PVM
analysts said in a note.
The American Petroleum Institute had previously reported a
decline of 708,000 barrels, raising hopes that official figures
would also show a fall.
Cushioning the bearish crude data, the EIA showed gasoline
and distillate inventories continued to draw.
(Additional reporting by Reporting by Aaron Sheldrick in TOKYO
Editing by David Goodman and David Evans)