By Stephanie Kelly and Muyu Xu
(Reuters) -Oil gained 1% on Thursday to snap its three-day decline, as risk appetite returned to financial markets after the U.S. Federal Reserve kept benchmark interest rates on hold.
Brent crude futures rose 82 cents, or 1%, to $85.45 a barrel by 0657 GMT, while U.S. West Texas Intermediate crude futures advanced 83 cents, also 1%, to $81.27 a barrel.
Both benchmarks settled at their multi-weeks lows in the previous session.
Oil's rally comes along with gains across financial assets after the Fed kept its benchmark interest rate unchanged at 5.25%-5.50% at its latest meeting on Wednesday.
Policymakers struggled to determine whether financial conditions may be tight enough already to control inflation, or whether an economy that continues to outperform expectations may need still more restraint.
"It is likely that the Fed will once again pause in December, keeping the door open for further hikes if necessary ... This could potentially stabilise the risk-off movements experienced over the past few months," Jon Maier, chief investment officer at Global X ETFs, said in a note.
Investors are also watching for developments in the Middle East which has kept investors on edge as a wider conflict could disrupt oil supplies around the region.
Iran's Supreme Leader Ayatollah Ali Khamenei called on Muslim states to cease oil and food exports to Israel, demanding an end to its bombardment of the Gaza Strip, state media reported.
Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), produced around 2.5 million barrels per day of crude in 2022, according to U.S. energy data.
Market participants awaited a Bank of England meeting, expected Thursday. In Europe, October inflation in the euro zone was at its lowest in two years, a Eurostat flash reading showed, stoking the view the European Central Bank is unlikely to hike interest rates soon.
J.P.Morgan analysts estimated global oil demand averaged 102.1 million barrels-per-day (bpd) in October, about 100,000 bpd below their previous projection for the month.
Data from U.S. Energy Information Administration (EIA) showed that the country's crude stocks increased as refiners undergoing seasonal maintenance restarted units more slowly than expected.
But despite lower refining runs, U.S. gasoline stocks rose by 0.1 million barrels in the week to 223.5 million barrels, the EIA said.
(Reporting by Stephanie Kelly and Muyu Xu; Editing by Lincoln Feast and Jacqueline Wong)
