U.S. crude rose above $1 toward $85.60 a barrel on expectations of a drop in stockpiles and ongoing tension in Libya, offsetting weak data from China.

U.S. crude inventories were forecast to have fallen last week due to lower imports, a preliminary Reuters poll showed on Monday ahead of weekly data.

HSBC's China Flash PMI showed its factory sector is likely to slow slightly for a second consecutive month in August as sluggish overseas demand saps new orders.

(Reporting by Seng Li Peng; Editing by Sugita Katyal)